;!5|>'V 


IP::' 


;:'^v'.'/;.i.-;'ii'  ■  ■ 

|ijij?j.vi:;!:''v;'!:':' ' 


Ml-:;':";  ■ " 

!''f't:f-:i'i'''  ii^'^^j;'-''-'!  ■ "  i  1--'' 


•I'^^Vr 


AT    LOS  ANGELES 


— ii 


I 


THE  GIFT  OF 

MAY  TREAT  MORRISON 

IN  MEMORY  OF 

ALEXANDER   F  MORRISON 


1 


INDUSTRIAL 
FREEDOM 


BY 


DAVID   MACGREGOR   MEANS 


WITH    AN    INTRODUCTION    BY 
THE     HON.     DAVID     A,    WELLS 


i 


NEW   YORK 

D.   APPLETON   AND   COMPANY 

1897 


Copyright,  iSq7, 
BV'.D;'APPLETQN:  ANP  COMPANY. 


INTRODUCTION. 


Our  age  is  distinguished  by  the  attention 
given  to  the  condition  of  the  poorer  members  of 
society.  Vast  sums  have  been  devoted,  both  by 
individuals  and  by  governments,  to  the  allevia- 
tion of  the  sufferings  of  those  who  are  unable  to 
help  themselves,  and  it  might  seem  that  this  pro- 
fuse benevolence  would  be  sufficient  to  neutralize 
the  evils  of  poverty.  But  the  modern  sensitive- 
ness to  inequalities  of  condition  and  opportunity 
is  not  quieted  by  such  palliative  measures.  The 
enormous  increase  of  wealth  is  believed  to  indi- 
cate something  wrong  in  the  existing  principles 
of  its  distribution,  and  the  world  has  had  an  in- 
finite number  of  suggestions  made  to  it  for  the 
improvement  of  its  constitution.  Some  of  these 
suggestions  are  wise  and  practical.  They  are 
made  in  the  light  of  experience  and  with  regard 
to  the  permanent  conditions  of  human  progress. 

Other  proposals  are  bolder,  and  assume  that 
under  changed  circumstances  human  nature  may 

ii: 

432371. 


IV  INDUSTRIAL    lUI  t  I)<>M. 

become  something  very  (liliiit.iii  iiom  wliat  it 
lias  hitherto  shown  itself  to  be. 

Most  of  these  latter  suggestions  have  the 
common  aim  of  proposing  to  effect  the  desired 
changes  by  compulsory  measures.  They  look  to 
Government  as  the  agent  by  which  improvement 
is  to  be  introduced,  and  to  legislation  as  the 
means  to  be  employed.  They  imply  that  by  such 
instrumentalities  greater  equality  in  the  distri- 
bution of  wealth  can  be  attained.  They  assume 
that  without  decreasing  the  aggregate  produc- 
tion of  mankind,  the  share  now  appropriated  by 
the  rich  may  be  diminished,  and  that  allotted 
to  the  poor  may  be  enlarged.  They  refuse  to 
be  bound  by  the  severe  restraints  prescribed 
by  the  experience  of  the  race,  because  that  ex- 
perience has  been  obtained  under  the  influence 
of  militant  passions.  The  great  principle  of  hu- 
man brotherhood  is  now  becoming  dominant, 
and  the  lessons  derived  from  the  days  when 
hatred  and  malice  governed  human  action  are  no 
longer  applicable. 

It  is  not  to  be  denied  that  these  proposals  are 
attractive.  The  end  to  be  attained  is  so  desira- 
ble as  to  appeal  to  the  best  elements  in  our  na- 
ture. It  interests  the  benevolent  members  of 
the  well-to-do  classes,  who  feci  that  they  can  not 
altogether  justify  their  possession  of  so  large  a 


INTRODUCTION.  V 

share  of  the  good  things  of  this  Hfe.  Hence  they 
give  a  certain  countenance  to  many  of  the  social- 
istic schemes  for  improving  the  condition  of  the 
poor.  They  are  not  prepared  to  estimate  the 
tendencies  or  ultimate  results  of  these  schemes 
very  critically,  and  they  yield  them  a  qualified 
support  with  the  vague  hope  that  somehow  good 
may  come  out  of  them. 

It  is  the  aim  of  this  essay  to  show  that  no 
good  can  come  out  of  them.  The  author  con- 
siders the  existing  methods  of  distributing  the 
products  of  human  activity  by  means  of  the 
wages  system,  and  demonstrates  that  it  tends  to 
establish  working  people  in  a  state  of  independ- 
ence rather  than  subjection;  to  promote  "in- 
dustrial freedom,"  not  to  produce  "  industrial 
slavery."  He  shows  how  intimately  the  welfare 
of  labourers  is  connected  with  the  prosperity  of 
their  employers,  and  how  the  attempts  to  dimin- 
ish the  wealth  of  corporations  may  diminish  the 
fund  of  capital  out  of  which  the  wages  of  labour- 
ers are  paid.  He  points  out  the  dangers  that 
arise  from  the  misapplication  and  abuse  of  the 
taxing  power,  and  indicates  the  pecuHar  evils  to 
which  such  abuses  will  lead  under  our  form  of 
Government. 

It  is  the  general  aim  of  socialists  to  take  from 
the  rich  in  order  to  give  to  the  poor,  but  they  sel- 


VI  INDUSTRIAL    FREEDOM. 

(loin  advocate  this  direct  redistribution.  They 
pro^jose  to  ai)j)ly  tlie  increased  taxes  which  they 
would  impose  on  accumulated  property,  or  the 
income  derived  therefrom,  to  all  sorts  of  public 
enterprises.  In  other  w<^rds,  they  would  increase 
the  number  of  persons  in  the  pay  of  the  Govern- 
ment, and  the  amount  expended  in  public  works, 
with  the  idea  that  labourers  or  poor  people  as  a 
class  will  be  benefited.  But  they  overlook  the 
fact,  which  is  pointed  out  in  this  book,  that  the 
public  revenue  can  be  added  to  only  by  subtrac- 
tion from  private  revenue,  and  that  the  impair- 
ment of  private  accumulation  may  reduce  the 
fund  applied  to  the  payment  of  labourers  more 
than  the  expenditure  of  Government  can  increase 
it.  In  this  way  the  proposals  of  the  socialists 
defeat  themselves,  and  if  carried  out  would  in- 
jure the  poor  as  a  class.  The  expense  of  Govern- 
ment is  a  charge  that  the  public  must  bear,  but 
its  limits  are  defined  by  experience,  and  the 
modern  tendency  to  exceed  them  results  in  cor- 
ruption and  extravagance,  which  may  in  the 
first  place  be  injurious  to  the  rich,  but  which 
eventually  causes  suffering  among  the  poor. 

To  turn  aside  after  the  ideals  of  the  socialists 
is  thus  directly  productive  of  injury  to  the  gen- 
eral welfare.  It  is  also  indirectly  prejudicial,  be- 
cause the  verv  best  element  in  our  societv.  that 


INTRODUCTION.  Vll 

which  is  both  conscientious  and  cultivated,  is 
led  to  waste  strength  needed  for  important  re- 
forms. There  are  many  reforms  about  which 
most  people  are  agreed,  but  they  can  be  accom- 
plished only  by  the  union  of  all  public-spirited 
citizens.  If  these  citizens  lend  their  support  to 
the  measures  of  socialistic  tendency,  they  can  not 
expect  to  carry  out  conservative  reforms.  If 
they  are  not  in  accord  as  to  their  general  line  of 
political  action  the  consequences  may  be  disas- 
trous for  the  country.  Their  efforts  neutralize 
each  other,  and  when  honest  men  fall  out,  rogues 
get  their  own  way.  We  have  recently  had  a 
startling  exhibition  of  the  prevalence  of  Jacobin- 
ical doctrines  among  our  demagogues,  and  of 
their  popularity  among  our  people.  If  such 
doctrines  are  to  be  overcome,  it  will  be  by  means 
of  the  diffusion  of  such  truths  as  are  contained 
in  this  book,  and  those  who  are  concerned  for  the 
future  of  our  country  will  do  well  to  read  it  and 
to  let  it  influence  their  thought  and  action, 

David  A.  Wells. 

NoRV.'iCH,  Conn.,  Scpiemler  i,  iSgj. 


CONTENTS. 


CHAPTER  PAGE 

I. — The  grievance i 

II. — The  standard  of  justice 9 

III. — Relations    between    the    employer    and    the 

employed 20 

IV. — The  status    of    labourers    employed   by   cor- 
porations       29 

V. — Some  exceptions  considered         ....  39 
VI. — Some     elementary     truths    about     corpora- 
tions       60 

VII. — Personal  relations  in  corporate  industry      .  88 

VIII. — Corporations  possessing  monopolies   ...  98 

IX. — The  partnership  theory 123 

X. — What  limits  the  rate  of  wages         .        .        .  146 
XI. — The    nature     of     profits,    and    some    conse- 
quences OF  reducing  them      ....  159 
XII. — Possible    effect   on    wages    of    reducing   the 

RATE   of   profit 189 

XIII. — Particular  measures  for  reducing  profits      .  209 

XIV. — Conclusion 237 


INDUSTRIAL   FREEDOM. 


CHAPTER  I. 

THE    GRIEVANCE.-'  '      ' 

If  we  were  to  follow  ilie  complaints'  ©f"  bl>e 
existing  constitution  of  human  society  to  their 
ultimate  source,  we  should  find  them  all  em- 
braced under  the  head  of  injustice.  There  are 
numberless  specific  evils,  but  in  the  end  they  can 
all  be  traced  back  to  this  fundamental  ground  and 
cause.  It  is  not  mere  inequality  of  possessions 
that  arouses  discontent  and  indignation.  Every 
one  who  thinks  seriously  of  the  matter  sees  that 
the  natural  endowments  as  well  as  the  achieve- 
ments of  men  differ  so  greatly  as  to  make  any 
absolute  equality  of  rewards  the  height  of  in- 
justice. To  enforce  such  equality  would  be  to 
put  a  premium  on  vice  and  incompetency.  But 
the  underlying  feeling  is  that,  after  all  such  al- 
lowances are  made,  the  dififerences  in  the  distri- 
bution of  the  comforts  and  enjoyments  of  life 
are  excessive  and  unjust.     We  find  ourselves  in 


2  INOfSTKIAL    rRKKDflM. 

the  possession  of  ic-rtrun  advaiitn^^cs,  not  simply 
material  advantages,  but  advantages  of  educa- 
tion, of  travel,  of  society,  of  culture,  of  the 
graces  of  life,  which  advantages  arc  not  pos- 
sessed by  numbers  of  our  fellow-citizens  whom 
we  feel  to  be  as  deserving  as  ourselves.  We  be- 
lieve them  to  be  morally  as  good  as  we  are,  and 
perhaps  not  infrequently  better.  W'c  sec  that 
they,  are  endowed  by  Nature  with  equal  or  su- 
perior intellectual  powers.  They  often  work  as 
hard  as  we  do,  and  if  we  take  into  account  the 
disagreeable  conditions  of  their  labour,  the  pre- 
cariousness  of  their  employment,  and  the  con- 
stant proximity  of  want,  their  work  may  fairly  be 
called,  if  not  harder  than  ours,  at  least  more 
unpleasant.  On  any  comprehensible  theory  of 
justice  it  certainly  seems  that,  unless  we  fare 
better  than  we  deserve,  they  fare  worse  than  they 
deserve.  Our  fathers  appear  to  have  accepted 
this  dispensation  without  questioning  it  too  par- 
ticularly. They  received  their  blessings  as  by 
the  grace  of  the  Almighty,  and  left  the  justice 
of  his  treatment  of  the  poor  with  him.  Possibly 
there  was  in  this  somewhat  of  the  disposition 
of  the  Pharisee  to  be  thankful  over  not  being  as 
other  men  are;  but  at  all  events  this  is  not  our 
attitude.  So  far  from  being  thankful  for  our 
own   favoured   lot.   we   complain   that   it    is   too 


THE    GRIEVANCE.  3 

favoured,  and  that  others  who  are  as  good  as  we 
are  do  not  share  it. 

As  I  have  said,  it  is  not  so  much  the  distri- 
bution of  material  things  that  causes  our  feeHng. 
No  doubt  the  fare  of  the  masses  of  mankind  is 
very  plain,  their  clothing  coarse,  their  shelter 
poor,  their  luxuries  few.  We  live  on  a  variety  of 
choice  meats  and  vegetables  and  fruits;  they  live 
on  salt  pork  and  cabbage  and  potatoes.  We 
have  constantly  on  our  tables  wines  and  other 
beverages  which  they  have  never  tasted  and  will 
never  taste.  We  carpet  our  houses,  and  warm 
them  with  open  fires  and  furnaces;  they  have 
stoves  and  bare  floors.  We  cover  our  bodies 
with  delicate  fabrics  of  wool  and  silk;  they  cover 
theirs  with  coarse  cotton  cloth  and  shoddy.  It 
is  idle  to  extend  the  list;  we  know  that  we  have 
hundreds  of  pleasant  things  which  they  can  not 
have  or  hope  to  have. 

But  in  spite  of  our  luxurious  Uving  and  of 
their  humble  fare,  we  do  not  regard  this  inequal- 
ity as  the  greatest  of  hardships.  We  have  learned 
that  the  life  is  more  than  meat  and  the  body  than 
raiment.  Food  is  nothing  without  appetite,  and 
with  appetite  the  coarsest  fare  is  delicious.  So 
long  as  the  material  conditions  are  such  as  to 
maintain  the  physical  system  in  health,  the  rest 
is  largely  vanity.     Many  men  and  many  women 


4  INUUSTKIAL    FKKKDOM. 

have  found  themselves  better  and  happier  when 
they  have  lost  their  fortunes  and  been  compelled 
to  work;  and  if  this  can  be  true,  the  deprivation 
of  luxuries  implies  no  injustice  in  the  nature  of 
things,  r.ut  wc  have  come  to  take  a  broader 
view  of  man  than  as  simply  an  animal  to  be  well 
fed  and  groomed.  We  hold  to  the  brotherhood 
of  mankind,  and  recognise  in  every  human  being 
the  existence  of  like  capacities,  the  potentiality 
of  adections  and  aspirations  similar  to  our  own. 
Happiness  is  conditioned  on  development,  but 
development  is  conditioned  on  opportunity.  The 
struggle  for  mere  survival  among  the  peoples  of 
the  earth  is  no  longer  so  desperate  as  of  old;  but 
what  shall  we  say  of  the  struggle  for  develop- 
ment, for  intellectual  attainment,  for  moral  re- 
finement, for  the  expression  of  genius?  We 
need  not  visit  the  country  churchyard  to  find  oc- 
casion to  lament  the  ''  heart  once  pregnant  with 
celestial  fire."  Never  morning  wears  to  evening 
but  some  such  hearts  do  break,  and  his  experi- 
ence is  limited  who  has  not  known  many  of 
whom  he  must  say: 

Chill  penun-  repressed  their  noble  rage, 
And  froze  the  genial  current  of  their  soul. 

It  is  here  that  our  sense  of  justice  is  sorely 
wounded.  How  anxiously  wc  seek  the  most 
eminent    doctors   at    the   suspicion    that    disease 


THE    GRIEVANCE.  5 

threatens  our  lives,  even  while  we  may  admit 
that  we  could  easily  be  spared!  But  our  poor 
brother,  whose  life  is  the  sole  support  of  his 
family,  must  take  it  in  his  hands  and  run  his  risk 
of  sickness.  How  tenderly  we  shield  our  chil- 
dren from  the  knowledge  of  what  is  vile  and 
from  the  companionship  of  those  who  are  cor- 
rupting, and  seek  to  give  them  every  possible 
advantage  of  pure  and  wholesome  surroundings! 
Are  there  not  parents  among  the  poor  who  love 
their  children  as  well,  but  who  have  no  choice  but 
to  familiarize  them  with  the  obscene  words  and 
practices  of  the  street  and  the  public  school? 
When  they  see  them  pining  away,  can  they  pro- 
cure for  them  such  treatment  or  such-  change  of 
climate  as  will  save  their  lives?  And  can  they 
be  convinced  that  .it  is  just  that  those  whom 
they  love  so  well  should  die  for  the  lack  of 
what  the  rich  could  spare  from  their  lavish  lux- 
ury without  even  missing  it?  Is  it  nothing  to 
them  that  the  most  promising  talents  must  be 
suppressed  and  stunted  by  early  devotion  to 
manual  toil,  that  powers  whose  development 
would  reward  the  most  liberal  expenditure 
must  be  crushed  and  blighted  by  the  mere  lack 
of  food? 

Certainly  these  deprivations  are  felt,  bitterly 
felt,  and  to  maintain  that  they  are  in  accordance 


O  INDUSTRIAF.    I  KKMDOM. 

with  justice  scfiiis  but  mockt-ry.  J)<)ul>tlcss  the 
I)<)()r  arc  in  some  respects  better  off  tlian  ever  be- 
ft)re;  but,  on  tlie  other  hand,  they  have  perhaps 
never  felt  their  poverty  so  keenly  as  now.  They 
have  been  awakened  to  ai)parent  possibiHties  of 
development  and  progress  of  which  they  formerly 
never  thouj^ht;  but  they  find  these  possibilities 
iiKTcly  the  ^tulT  that  dreams  are  made  of.  If  re- 
membering happier  things  is  sorrow's  crown  of 
sorrows,  what  shall  be  said  of  finding  that  hafjpier 
things  once  anticipated  are  forever  unattainable? 
Yet  such  must  be  the  lot  of  by  far  the  greater 
number  of  the  poor.  Their  lives  and  their  chil- 
dren's lives  must  be  passed  in  a  continuous  strug- 
gle with  care  and  want,  and,  so  far  as  hope  of 
progress  is  concerned,  they  soon  learn  that  the 
battle  is  lost,  and  that  even  hope  must  be  aban- 
doned. While  there  is  no  more  disheartening 
feeling  than  that  of  our  own  exclusion  from  all 
possibility  of  success  in  life,  it  is  intensified  by 
the  conviction  that  it  is  undeserved,  and  that 
others  who  arc  perhaps  by  nature  our  infe- 
riors are  granted  the  opportunities  of  develop- 
ment denied  to  us.  Small  wonder  that  social- 
ism tends  to  become  the  religion  of  the  poor 
of  Europe,  or  even  that  anarchy  seems  to 
some  the  first  step  toward  the  attainment  of  jus- 
tice. 


THE    GRIEVANCE.  7 

Such  "  clouds  of  nameless  trouble  "  as  give 
rise  to  general  denials  of  the  justice  of  the  na- 
ture of  things,  however  real,  are  yet  too  vague 
to  lead  to  the  formulation  of  specific  charges. 
But  from  time  to  time  there  come  crises,  such  as 
the  outbreak  at  the  Carnegie  works  at  Home- 
stead, and  the  Chicago  riot,  when  particular  fea- 
tures of  the  present  social  system  are  thrust  into 
odious  prominence.  The  sting  of  poverty  then 
maddens  the  multitude,  and  for  a  moment  the 
dream  of  a  social  revolution,  in  which  their  op- 
portunities shall  come,  approaches  the  reality  of 
a  hope.  Then,  too,  the  latent  feeling  of  injustice 
blazes  up  among  the  benev'olent,  and,  until 
quenched  by  reports  of  violence  and  rapine,  leads 
them  to  express  their  sympathy  with  the  aspi- 
rations of  the  labourers.  Even  when  the  battle 
has  been  lost  and  those  who  rebelled  against 
their  lot  have  been  compelled  to  submit  per- 
haps to  even  harder  conditions  than  before,  it 
is  impossible  not  to  be  moved  by  the  pity  of  it 
all,  or  not  to  regret  that  somehow  the  weaker 
combatants  might  not  have  prevailed.  Such 
submission  is  but  yielding  to  superior  might, 
and  involves  no  conviction  of  the  reason,  no  con- 
version of  the  heart.  It  is  like  the  submis- 
sion of  slaves  whose  fierce  outbreak  for  freedom 
has  been  crushed  by  the  combined  force  of  their 


8  INDUSTIUAI.    IKI.KDOM. 

masters;  and  st'ciiijj^  tlicsc  tliiiij;s,  many  arc  led  to 
si)fal<  of  and  to  believe  in  the  existence  of  such 
Iiar(lslii|)s  in  the  condition  of  the  l.nhonring  classes 
as  may  fairly  be  said  to  constitute  a  status  of 
industrial  slavery. 


CHAPTER  II. 

THE    STANDARD    OF   JUSTICE. 

Before  undertaking  a  particular  examination 
of  the  economic  institutions  that  are  beHeved  to 
work  injustice,  it  is  desirable  to  ascertain  as  pre- 
cisely as  possible  the  meaning  which  we  attach 
to  that  word  when  we  speak  of  human  society. 
In  the  first  place,  it  is  to  be  observed,  the  be- 
liefs of  men  concerning  the  government  of  the 
universe  are,  from  our  point  of  view,  irrelevant. 
This  is  so  because  of  the  distinction  between 
remediable  and  irremediable  evils.  Death,  for 
example,  is  an  evil,  but  it  is  an  unavoidable  evil, 
and  it  is  therefore  not  properly  described  as  an 
injustice.  The  theist,  certainly,  can  not  call  God 
unjust.  He  has  created  Hfe  and  ordained  death 
according  to  his  good  pleasure;  and  shall  the 
thing  formed  say  to  him  that  formed  it,  "  Why 
hast  thou  made  me  thus?  "  But  the  agnostic 
is  even  more  effectually  estopped.  The  laws  of 
the  universe  are  for  him  no  personal  commands, 
but  mere  uniformities  in  the  operation  of  Nature. 


lO  INDUSTKIAI.    FRKKDOM. 

The  attrilmtc  of  justice  is  alloj^cthcr  inapplica- 
lilc  to  such  conceptions,  and  the  most  that  can 
be  said  is  that  they  do  not  operate  to  our  hking. 

Christians  may  entertain  (hfTerent  views  con- 
cerninj;  sin  and  evil.  They  may  beHevc  that  the 
(hvine  idea  of  justice  is  substantially  the  same  as 
the  Iniinan.  and  that,  however  it  may  be  with 
sin,  evil  is  only  relative.  So  may  ajjnostics  hold 
that  the  laws  of  the  universe  tend  to  promote 
human  hap|)incss  and  welfare.  But  they  must 
all  atjrce  i)oth  that  sufTering  and  death  are  in- 
trinsically undesirable,  and  that  they  arc  not 
projicrly  characterised  as  unjust. 

Hence,  whenever  we  speak  of  injustice,  it 
is  to  be  understood  that  human  injustice  is  re- 
ferred to.  If  we  maintain  that  an  institution  is 
unjust,  such  as  polygamy,  for  example,  we  mean 
that  human  beings  wrongfully  maintain  the  in- 
stitution. It  may  not  be  easy  to  determine  who 
these  human  beings  are,  or  how  their  responsi- 
bility is  distributed;  but  such  human  beings  there 
must  be,  unless  we  commit  the  absurdity  of 
charging  an  abstraction  with  moral  turpitude. 
Such  expressions,  therefore,  as  the  injustice  of  the 
present  constitution  of  society,  are  really  peri- 
phrastic; they  can  mean  only  that  some  human 
beings  are  acting  unjustly  toward  others.  To 
say  this  is,  of  course,  not  to  define  justice;  that 


THE    STANDARD    OF    JUSTICE.  II 

definition  will  indeed  occupy  all  the  rest  of  our 
space.  But  we  shall  find  our  labour  greatly- 
lightened  by  bearing  it  steadily  in  mind  that 
what  is  immutable  is  not  unjust,  and  that  there 
is  properly  no  injustice  except  in  the  unjust  acts 
of  human  beings. 

In  order  to  simplify  the  inquiry  still  further, 
let  us  define  the  injustice  of  which  complaint  is 
made  as  consisting  in  the  compensation  of  la- 
bourers at  too  low  a  rate.  By  this,  as  is  ex- 
plained above,  we  mean  not  merely  that  we 
should  like  to  have  this  rate  of  compensation  in- 
creased, but  that  it  is  practicable  to  increase  it. 
By  labourers,  it  may  be  assumed,  we  mean  or- 
dinary manual  labourers  who  work  for  wages,  and 
not  all  persons  who  perform  labour.  We  should 
be  led  quite  astray  if  we  undertook  to  include 
in  our  inquiry  all  those  who  make  any  exertion 
for  a  compensation.  Many  such  persons,  pros- 
perous doctors  and  lawyers,  for  example,  fre- 
quently possess  much  more  wealth  than  those 
who  employ  them,  and  while  they  may  complain 
of  the  inadequacy  of  their  compensation,  and 
even  of  the  slavery  of  their  lives,  their  condition 
does  not  arouse  the  sympathy  of  the  public.  The 
ordinary  manual  labourer,  however,  is  conceived 
as  immediately  dependent  for  subsistence  on  the 
compensation  received  for  his  labour,   and   the 


12  INDUSTRI.M-    FREEDOM. 

quality  of  his  subsistence  is  therefore  affected  by 
the  quantity  of  his  compensation. 

For  tlic  same  reason  skilled  labourers  are 
properly  excluded.  They,  too,  complain  that 
their  compensation  is  inadequate,  but  their  de- 
pendence on  this  compensation  is  less  immedi- 
ate and  the  quality  of  their  subsistence  is  hij^hcr 
than  that  of  ordinary  labourers.  The  subsist- 
ence of  these  latter,  it  is  undoubtedly  believed, 
is  not  ample  or  varied  enough  to  enable  them 
to  attain  that  development  of  their  capacities  as 
human  beings  which  is  desirable,  and  those  who 
deny  them  greater  compensation  than  they  now 
receive  are  therefore  held  to  be  guilty  of  injus- 
tice. 

We  must  also  determine  whether  we  mean, 
in  speaking  of  ordinary  labourers,  to  include  the 
whole  class,  or  only  some  of  its  members.  I 
think  it  will  appear,  on  reflection,  that  it  is  the 
condition  of  the  whole  class  that  arouses  the  sym- 
pathy of  the  benevolent.  There  is  no  doubt  a 
considerable  ditlerence  in  the  compensation  of 
the  members  of  this  class.  As  Mr.  Booth  has 
shown  in  his  investigation  of  the  condition  of 
the  poor  of  London,  there  is  a  "  submerged 
tenth."  whose  subsistence  is  very  precarious  and 
miserable.  This  lowest  stratum,  however,  is 
composed  principally  of  those  who  are  morally 


THE    STANDARD    OF    JUSTICE.  1 3 

delinquent.  It  is  true  that  some  persons  main- 
tain that  the  immoraUty  of  these  degraded  crea- 
tures is  a  necessary  consequence  of  the  condi- 
tions under  which  they  live,  and  that  they  are 
therefore  not  responsible  for  it.  Into  the  ques- 
tion of  their  actual  culpability  we  do  not  need  to 
enter,  but  it  is  impossible  to  deal  with  human 
beings  practically  upon  any  fatalistic  theory.  We 
can  not  confine  the  application  of  such  theories 
to  any  class  of  humanity.  Excluding  the  insane, 
we  are  obliged  to  assume  that  all  adults  are  re- 
sponsible beings,  and  that  they  have  the  ability 
to  be  moral.  The  temptations  are  different  for 
different  classes,  and  we  can  not  determine  de- 
grees of  guilt;  but  it  is  quite  compatible  with 
the  exercise  of  the  largest  charity  to  hold  that 
no  one  shall  throw  all  the  blame  for  his  own 
drunkenness  or  dishonesty  upon  other  people's 
shoulders. 

We  may  not  feel  disposed  to  cast  a  stone  at 
the  poor,  but  if  we  undertake  to  acquit  them 
of  responsibility  for  the  vices  common  to  those 
in  their  station,  we  can  not  logically  refuse  to 
exonerate  the  rich  from  blame  for  the  vices  which 
prevail  among  their  class.  The  obstacles  to  vir- 
tue which  are  encountered  by  the  very  poor  may 
be  formidable,  but  they  are  not  insurmountable; 
for  many  of  the  poor  surmount  them.     It  is  their 


14  INDUSTRIAL    FRKKDOM. 

l.uk  of  honesty  and  tcmpcr.incc,  however,  that 
causes  the  lowest  stratum  of  the  poor  to  receive 
less  compensation  for  their  labour  than  ordinary 
labourers.  To  maintain  that  their  compensation 
should  justly  be  as  j^reat,  would  lead  to  the  per- 
nicious doctrine  that  virtuous  conduct  is  no  more 
deserving  than  vicious,  and  that  it  is  unjust  to 
pay  less  compensation  for  the  services  of  drunken 
and  dishonest  labourers  than  for  those  of  the 
faithful  and  sol)cr, 

hi  other  words,  the  meaji^re  subsistence  of  the 
extremely  poor  is  mainly  due  to  their  own  lack 
of  virtue,  and  not  to  the  injustice  of  social  ar- 
rangfements.  The  existence  of  that  injustice 
must  be  established  by  showing  that,  because  of 
these  arrangements,  the  ordinary  labourer  who  is 
willing  to  work  hard  and  be  temperate  is  unable 
to  procure  the  wherewithal  for  proper  subsist- 
ence. The  prol)lcm  of  the  "  submerged  tenth  " 
is,  in  short,  not  the  same  as  that  portion  of  the 
"  labour  problem  "  which  we  are  considering  un- 
der the  head  of  industrial  slavery. 

W'e  must  recognise  the  fact  that  the  com- 
pensation of  ordinary  labourers  appears  to  vary 
considerably,  even  when  the  amount  of  service  is 
the  same.  \\'agcs  in  large  cities  are  frequently 
higher  than  in  the  country,  and  they  are  higher 
in  some  parts  of  the  country  than  in  others.     But 


THE    STANDARD    OF    JUSTICE.  1 5 

it  will  generally  be  found  that  the  cost  of  sub- 
sistence varies  accordingly.  We  read  in  the  re- 
ports of  the  Department  of  Agriculture  that 
milch  cows  are  valued  at  ten  dollars  in  Utah 
and  at  thirty-two  dollars  in  Massachusetts;  that 
hogs  are  worth  less  than  four  dollars  in  Nevada 
and  over  eleven  dollars  in  Connecticut;  and  the 
prices  of  grain  vary  to  a  corresponding  extent. 
As  food  varies  so  greatly  in  price,  it  is  evident 
that  the  real  compensation  of  labourers  is  very 
imperfectly  measured  by  money  wages,  and  that 
much  of  the  inequality  in  the  latter  is  only  ap- 
parent. Moreover,  unless  prevented  by  laws,  or 
by  combinations,  labourers  constantly  tend  to 
remove  from  where  the  rate  of  compensation  is 
low,  and  to  go  where  it  is  high.  Adam  Smith 
remarked  upon  the  influence  of  the  law  of  set- 
tlement and  the  exclusive  privileges  of  the  cor- 
porations or  trade-unions  in  promoting  inequality 
of  wages  in  England;  and  the  modern  trade- 
unions,  as  they  profess  the  same  intention, 
doubtless  accomplish  the  same  result.  But  the 
improvement  of  the  means  of  travel  is  a  pro- 
digious power  in  equalizing  wages,  as  is  suffi- 
ciently shown  by  the  enormous  volume  of  mi- 
gration in  modern  times;  and  we  may  now  make 
the  assumption  of  an  average  compensation  for 
ordinarv  labourers  with  less  deviation  from  the 


l6  IM»1    M  UlAI,     JI<I.I.I><»M. 

actual  rates  paid  than  ever  before.  And  as  it 
is  plainly  impossible  to  consider  the  case  of  la- 
bourers individually,  \vc  must  be  limited  to  an 
examination  of  the  conditions  of  their  average 
compensation. 

It  follows,  therefore,  if  the  compensation  of 
labourers  is  unjustly  small,  either  that  employ- 
ers are  able  under  the  existing  social  system  to 
pay  higher  compensation  (else  there  would  be 
no  injustice),  or  that  under  some  other  system 
than  that  of  free  contract  this  compensation 
would  be  greater.  For  a  number  of  reasons  it 
does  not  seem  worth  while  to  add  another  to 
the  many  elaborate  criticisms  of  the  schemes  for 
tiic  abolition  of  property  and  freedom  of  con- 
tract which  go  under  the  name  of  communism 
or  collectivism.  Some  of  these  reasons  will  be- 
come evident  as  we  proceed;  but  one  of  the  most 
cogent  is  suggested  by  the  proverb.  "  An  two 
men  ride  of  a  horse,  one  must  ride  behind."  All 
modern  industry,  all  industry  upon  any  large 
scale  is  necessarily  co-operative.  In  order  to  ac- 
complish any  useful  result,  there  must  be  direc- 
tion and  subordination.  There  have  not  been 
nianv  concrete  socialisms:  but  they  have  invari- 
ably encountered  this  .difficulty  and  succumbed 
to  it.  Freedom  of  contract  being  abolished,  sub- 
mission to  authority  must  take  its  place. 


THE    STANDARD    OF    JUSTICE.  1/ 

Accordingly,  we  find  that  all  communistic 
schemes  provide  for  compulsory  labour,  and  that 
in  them  the  condition  of  the  labouring  class  must 
be  that  of  "  industrial  slavery.''  In  theory,  the 
labourers  would  choose  their  directors  or  mas- 
ters by  universal  suffrage,  and  would  thus  pre- 
serve a  theoretical  freedom.  Even  this  freedom 
would  be  confined  to  the  members  of  the  ma- 
jority. But  if  any  ordinary  member  of  the  po- 
litical faction  that  happens  to  be  dominant  in 
our  present  society  will  consider  the  matter,  he 
will  quickly  see  that  he  has  practically  nothing 
to  say  about  the  officers  who  direct  his  action. 
Theoretically  he  has  a  part  in  their  selection; 
practically  he  is  entirely  helpless  as  to  who  shall 
be  policemen,  or  inspectors,  or  judges,  or  county, 
State,  or  national  officers.  These  officers  now 
control  but  a  small  part  of  his  action.  Under 
communism  they  would  control  the  whole  of  it; 
and  hence  the  most  repugnant  part  of  the  rela- 
tion between  employer  and  employed — that  of 
obedience  and  submission  by  one  human  being 
to  the  authority  of  another — would  be  intensified. 

At  present  the  labourer,  if  he  is  obliged  to 
work  for  a  master,  is  at  least  able  to  choose 
whom  he  will  serve,  and  can  change  at  his  pleas- 
ure. Under  the  regime  of  socialism  no  such 
liberty  could  be  tolerated.     It  would  produce  as 


l8  INUrsiulAI.    rRKKDOM. 

niucli  confusion  as  to  permit  private  soldiers  to 
shift  from  regiment  to  regiment,  according  to 
tlicir  hinnour.  The  (hrcction  of  industry  in  a 
sociahstic  slate  would  rc(|uire  much  more  skill 
.'UKJ  forethought  than  the  direction  of  a  military 
campaign,  and  the  greatest  disasters  would  re- 
sult if  the  labourers  assigned  to  one  department 
of  industry  should  choose  to  abandon  it  for 
another. 

r.ut,  as  I  have  said,  it  is  foreign  to  my  purpose 
to  criticise  the  schemes  of  socialists  at  length. 
All  that  the  present  argument  requires  is  that 
we  should  recognise  the  fact  that  socialism  im- 
plies the  surrender  of  the  freedom  of  the  labourer, 
the  expectation  being  that  this  will  be  more  than 
made  up  for  by  the  increase  of  his  compensation. 
We  are  therefore  brought  back  to  a  considera- 
tion of  the  possibility  of  such  increase,  whether 
under  the  existing  regime  or  any  modification 
of  it  that  is  conceivable. 

A  word  of  caution  may  be  offered  here.  In 
attempting  reform,  we  can  not  deal  with  indi- 
vidual cases;  we  must  proceed  by  means  of  gen- 
eral laws.  For  one  thing,  the  number  of  indi- 
viduals is  too  great.  To  devise  regulations  for 
their  action  would  be  altogether  beyond  human 
power,  and  the  varieties  of  individual  caprice  are 
so  infinite  as  to  surpass  calculation.     Hence  we 


THE    STANDARD    OF    JUSTICE.  I9 

must  classify  human  beings  and  human  acts,  and 
frame  or  modify  laws  and  institutions  with  ref- 
erence to  these  classifications.  These  laws  and 
institutions  may  cause  suffering  in  particular  in- 
stances, but  they  can  not  be  condemned  as  un- 
just unless  they  cause  more  suffering  than  would 
be  caused  by  different  regulations.  Humanly 
speaking,  therefore,  a  law  is  just  if  it  tends  more, 
on  the  whole,  to  promote  what  is  commonly  re- 
garded as  the  general  welfare  than  any  other 
law  that  can  be  devised  in  its  place.  Our  re- 
forming zeal,  therefore,  need  not  be  aroused  by 
complaints  of  the  injustice  of  any  existing  insti- 
tution, if  we  find  that  no  practical  change  of  this 
institution  is  suggested  or  conceivable.  Unless 
we  can  adopt  a  substitute  that  will  work  better, 
meddling  will  cause  more  injustice  than  it  will 
remove. 


CHAPTER  III. 

RELATIONS    BETWEEN    THE    EMPLOYER    AND    THE 
EMPLOYED. 

According  to  the  theory  of  our  law,  and  of 
popular  c^ovcrnment  in  general,  the  relation  be- 
tween the  employer  and  the  employed  is  one 
of  free  contract.  The  employer  offers  such  wages 
as  he  considers  proper  to  such  persons  as  he 
chooses.  The  labourer  is  free  to  accept  or  to 
reject  the  terms.  Here,  however,  according  to 
many,  theory  and  practice  diverge.  The  em- 
ployer is  free,  but  the  labourer  is  under  com- 
pulsion. The  employer  can  do  without  the  la- 
bourer, but  tlie  labourer  can  not  do  without  the 
employer.  The  law  may  call  the  labourer  a  free- 
man, but  modern  economic  conditions  have  made 
him  practically  a  slave. 

As  a  matter  of  fact,  however,  the  status  of 
a  slave  is  very  different  from  that  of  a  labourer 
in  modern  times.  A  slave  is  a  human  being  who 
can  make  no  legal  contract,  who  can  suffer  no 
tort,  and  who  is  legally  liable  to  compulsion  at 


EMPLOYER  AND  EMPLOYED.         21 

the  will  of  his  master.  He  is  thus  deprived  of 
freedom  of  locomotion,  and  receives  no  wages  for 
his  labour  except  such  support  as  the  master 
thinks  fit  to  allow  him.  According  to  this  defi- 
nition, the  modern  workman  is  very  far  from  be- 
ing a  slave.  He  may  be  drunken,  deceitful,  lazy, 
incompetent,  and  wasteful;  but  no  force  can  be 
applied  to  him  by  his  employer.  He  may  law- 
fully contract  with  any  one,  and  the  operation  of 
the  law  is  such  that  he  can  break  his  contracts 
with  employers  or  with  other  people  with  impu- 
nity, while  he  can  compel  them  to  keep  their  con- 
tracts with  him.  His  property  is  exempted  from 
liability  for  his  debts,  but  he  is  himself  a  preferred 
creditor.  No  one  may  prevent  him  from  going 
whither  he  pleases,  when  he  pleases,  or  staying 
anywhere  while  he  pleases.  So  far  as  his  legal 
status  is  concerned,  it  is  nowadays  indeed  an 
exceptionally  favoured  one.  The  law  has  been 
changed  so  that  combinations  of  labourers  for 
the  purpose  of  getting  higher  wages  are  per- 
mitted, although  combinations  of  capitalists  for 
the  purpose  of  raising  the  prices  of  their  products 
are  forbidden.  Labourers  may  combine  to  raise 
the  price  of  what  they  have  to  sell;  but  employ- 
ers may  not  combine  to  raise  the  price  of  what 
they  have  to  sell,  even  if  its  cost  to  them  is  in- 
creased by  the  combination  of  labourers. 


22  INDUSTRIAL    FRF.KDDM. 

Still,  it  is  iirj^n'd,  c.'ij)ital  lias  the  advantage 
of  lalxnir  in  the-  har^aiii  for  waj^cs.  It  can  af- 
ford to  l)c  idle,  wliicli  labour  can  not;  it  is  not 
lost  if  not  used,  like  the  labourer's  time;  and  it 
docs  not  suffer  from  cold  and  hunj^cr.  Putting 
this  in  concrete  form,  it  amounts  t(j  saying  that 
the  workman  is  more  dependent  on  the  employer 
than  the  employer  on  the  workman.  It  is  not 
altogether  easy,  lu)wever,  to  define  exactly  what 
is  meant  by  this.  The  co-operation  of  master 
and  workman  is  as  necessary  as  the  co-operation 
of  the  two  blades  of  a  i)air  of  scissors.  The  end 
in  view  can  not  be  attained  without  this  co-oper- 
ation, l-'urthermore,  it  is  to  a  large  extent  un- 
true that  capital  can  afford  to  be  idle;  that  it  is 
not  lost  if  it  is  not  employed.  To  attain  correct 
views  of  this  subject  we  must  examine  its  details 
^vit!l  some  care. 

\'ery  many  goods  which  are  properly  classed 
as  capital  arc  of  a  perishable  nature.  Milk,  for 
example,  must  be  immediately  consumed,  or  it 
will  become  worthless.  Its  production  also  is 
subject  to  the  same  condition  as  to  time;  for  if 
cows  are  not  milked  at  regular  intervals  they  are 
ruined.  The  same  is  true  of  the  production  of 
the  hay  and  grain  upon  which  cows  are  fed,  as 
well  as  of  most  agricultural  products.  The 
ground  must  be  prepared  in  due  season,  the  seed 


EMPLOYER  AND  EMPLOYED.         23 

sown,  the  crops  cultivated  and  harvested  at  just 
the  proper  time,  or  very  great  loss  will  result. 
Meat  and  fish,  fruits  and  vegetables,  must  be 
promptly  marketed  in  order  to  save  them — in 
spite  of  modern  appliances  for  refrigeration; 
and  when  cooked  by  those  who  make  feeding 
people  a  business,  they  can  not  be  kept,  but  must 
be  eaten  at  once. 

Many  things  not  subject  to  rapid  decay  never- 
theless lose  their  value  unless  disposed  of  to  the 
consumer  at  the  proper  moment.  Articles  of 
dress  are  subject  to  the  caprices  of  fashion  and 
quickly  become  unsalable.  Spring  goods  must 
be  sold  in  the  spring,  summer  goods  in  the 
summer,  "  holiday  goods  "  before  the  holidays 
are  over.  Pig  iron  is  an  article  of  most  inde- 
structible nature;  but  if  the  workmen  at  a  blast 
furnace  strike  before  the  charge  is  drawn,  the 
molten  ore  will  congeal  in  the  furnace  and  ren- 
der it  utterly  useless.  The  owners  of  steam  en- 
gines and  many  other  machines  are  frequently 
at  the  mercy  of  their  employees.  A  sudden  re- 
fusal to  work  may  result  in  very  great  destruc- 
tion. Nothing,  apparently,  is  less  perishable 
than  a  mine;  but  mines  require  to  be  kept  free 
from  water,  and  if  the  miners  prevent  the  opera- 
tion of  the  pumps,  as  they  have  occasionally  done, 
the  value  of  the  mines  may  be  annihilated. 


24  INDUSTRIAL    FREEDOM. 

Most  business  is  carried  on  largely  with  bf^r- 
rowcd  capital,  and  it  must  go  on  without  inter- 
ruption if  the  borrowers  are  to  remain  solvent 
and  the  lenders  arc  to  get  their  capital  back. 
Contractors  must  complete  their  jobs  at  specified 
times,  or  they  may  be  ruined,  anrl  their  backers 
with  them.  Even  if  a  man  uses  his  own  capital, 
he  can  seldom  afTord  to  let  it  be  idle.  Very  much 
more  than  the  loss  of  interest  is  generally  in- 
volved in  the  stoppage  of  business;  and  the  stop- 
page of  some  forms  of  business,  such  as  trans- 
portation, the  furnishing  of  food,  heat,  light,  etc., 
can  not  be  tolerated  by  society.  It  is  hardly  a 
figure  of  speech  to  say  that  capital  is  not  a  dead 
thing,  but  a  living  thing;  for  without  continu- 
ous nutrition  by  productive  activity  it  loses  its 
power,  and  its  very  existence  will  soon  terminate. 

It  may  be  said  that,  although  prolonged  idle- 
ness would  destroy  capital,  yet  it  can  bear  tem- 
porary lack  of  employment  better  than  labour. 
Even  this  is  true  only  with  modifications.  Very 
few  labourers  are  dependent  for  actual  subsist- 
ence on  incessant  toil.  Skilled  labourers  are  to 
a  deplorable  extent  given  to  drink,  and  thus 
prove  their  independence  of  continuous  employ- 
ment. Every  employer  has  had  workmen  who 
would  not  work  steadily;  who  chose  to  take  a 
day  off  from  time  to  time  for  rest  or  recreation. 


EMPLOYER  AND  EMPLOYED,         2$ 

Some  of  them  prefer  to  forego  their  wages  rather 
than  expose  themselves  to  rain,  or  cold,  or  heat; 
others  are  simply  lazy.  It  follows  that  if  in  their 
own  judgment  abstention  from  labour  has  ad- 
vantages that  compensate  for  loss  of  wages, 
abstention  at  the  will  of  their  employers  is  not  al- 
together injurious.  If  they  lose  their  wages,  they 
save  their  toil  and  have  their  time.  This  they 
can  often  employ  advantageously  at  their  homes; 
and  the  demand  for  an  eight  hours'  working  day 
proves  that  rest  and  leisure  are  not  unmixed  evils. 
Nor  should  we  forget  that  the  workman  is  not 
in  danger  of  actual  starvation  in  his  contests  with 
his  employer.  The  municipality  of  Paris  regu- 
larly devotes  the  funds  appropriated  for  the  poor 
to  the  relief  of  the  families  of  men  on  strike;  and 
under  our  poor  laws  the  workman  is  entitled  in 
the  last  resort  to  food  and  shelter,  the  expense 
of  which,  in  part  at  least,  his  employers  must 
defray.  Indeed,  it  is  now  the  case  that  funds 
are  regularly  contributed  in  aid  of  strikers  when- 
ever their  action  causes  serious  suffering  to  their 
families.  It  is  privation,  not  starvation,  to  which 
the  workman  is  exposed;  and  from  privation,  real 
as  well  as  apprehended,  employers  often  suffer. 
So  far  as  the  small  employer  is  concerned,  it  is 
unquestionably  true  that  he  is  often  quite  as  de- 
pendent on  his  servant  as  his  servant  on  him;  and 


26  INDITSTRIAI.    FRF.F.DOM. 

in  such  cases  the  siiffcrinj^s  of  the  employer,  when 
industry  is  iiitrmipud,  may  be  (|uitc  as  great 
as  those  of  the  workman.* 

It  will  perhaps  he  generally  conceded  that  in 
the  case  of  the  employer  who  has  but  a  small 
capital  and  engages  only  a  few  labourers,  freedom 
of  contract,  although  many  cases  of  hardship 
occur  under  it,  gives  on  the  whole  the  best  re- 


*  "If  the  l.ihourcrs  arc  in  \%-ant,  they  must  take  whatever  the 
capitalists  offer  them  ;  if  the  capitalists  are  in  want,  they  must  buy 
the  labour  on  the  cheapest  terms  they  can,  but  get  it  they  must. 
And  the  capitalist  is  as  likely,  perhaps,  to  be  in  want  as  the  la- 
bourer. It  is  true  that  the  distress  of  the  labourer  is  much  more 
conspicuous,  and  that  he  advertises  it ;  he  goes  about  saying,  '  I 
am  starving,  and  it  is  the  tyranny  of  capital  which  is  killing  me.' 
But  it  is  also  tnie  that  the  capitalist  is  in  danger  of  ruin,  and  that 
he  conceals  it.  If  he  can  not  complete  contracts  which  he  has  made, 
if  he  has  to  stay  out  of  a  return  from  his  business  longer  than  he 
can  afford,  he  is  ruined  ;  but  he  will  never  say  this,  because  it  may 
injure  his  credit  and  quicken  the  coming  of  the  evil.  He  will  lie 
awake  with  anxiety,  till  his  hair  turns  prematurely  gray,  and  till 
deep  lines  of  care  form  on  his  brow,  but  he  will  say  nothing.  And 
it  is  necessary  to  insist  on  this  now,  because  our  current  literature — 
some  even  of  our  gravest  economical  literature — is  dangerously 
tainted  with  superficial  sentiment :  it  speaks  much  of  the  sufferings 
of  the  workingmen,  which  are  seen,  and  little  of  those  of  the  capi- 
talist, which  are  not  seen.  But  the  capitalist,  being  a  higher  and 
more  thinking  kind  of  a  man,  is  probably  of  more  sensitive  organi- 
zation than  the  labourer,  and  pecuniary  anxiety  is  a  more  racking 
thing  than  any  physical  kind  of  pain  short  of  extreme  hunger.  The 
mental  feelings  of  the  capitalist  must  just  as  much  be  regarded  as 
those  of  the  labourer  in  computing  the  rate  at  which  the  money  of 
the  one  will  be  exchanged  for  the  labour  of  the  other." — Bagehot, 
Cost  of  Production. 


EMPLOYER  AND  EMPLOYED.         2/ 

suits  obtainable.  The  obvious  evils  from  disturb- 
ing it  are  greater  than  the  probable  gains.  But 
when  the  capital  of  the  employer  becomes  very- 
large,  and  especially  when  the  capital  of  a  great 
many  persons  is  combined  by  means  of  incor- 
poration, the  situation  presents  new  features. 
The  corporation  is  more  enduring  than  the  indi- 
vidual, and  capital  under  this  form  is  managed 
not  by  its  owners  but  by  their  agents.  Be- 
tween the  stockholders  of  a  corporation  and  its 
servants  there  is  frequently  no  personal  commu- 
nication, and  the  kindly  relations  that  naturally 
arise  from  contact  between  man  and  man  do 
not  take  place.  But  it  is  these  kindly  relations 
that  in  former  ages  softened  the  rigours  of  slavery 
and  feudalism,  and  that  have  made  the  evils  of 
the  regime  of  contract  tolerable.  If  it  is  impos- 
sible to  establish  relations  of  this  character,  or 
of  similar  tendency,  between  the  managers  of 
large  corporations  and  those  employed  by  them, 
the  future  can  not  be  contemplated  without  grave 
anxiety.  Indeed,  many  would  say  that  De 
Tocqueville's  prophecy  has  been  already  fulfilled, 
and  that  the  "  manufacturing  aristocracy,"  which 
was  growing  up  before  his  eyes,  has  become,  as 
he  anticipated,  one  of  the  harshest  which  ever 
existed  in  the  world. 

Of  course,  men  will  always  quarrel  so  long 


28  INDUSTKIAI.    I-UKEDOM. 

as  human  nature  remains  as  it  is.  Tlicrc  will 
always  he  bickerings  between  husbands  and 
wives,  for  that  matter,  but  we  do  not  c^n  that 
account  favour  the  abolition  of  matrimony.  Mas- 
ters and  servants  have  "  had  words  "  since  the 
days  of  the  patriarchs,  and  such  disputes  will 
continue.  lUit  in  all  bargaining  and  in  all  dis- 
putes nowadays  between  the  managers  of  great 
corporations  and  their  men,  it  seems  to  be  be- 
lieved that  freedom  of  contract  is  in  some 
peculiar  way  interfered  with;  that  some  new 
clement  of  inequality  is  introduced;  that  for  some 
reason  the  great  resources  of  the  employer  put 
the  employee  at  a  disadvantage.  Disputes  over 
the  contract  of  employment  in  such  cases  are 
therefore  regarded  as  differing  from  the  tradi- 
tional higgling  over  wages  between  master  and 
servant.  Such  disputes  are  spoken  of  as  the 
struggles  of  labour  to  emancipate  itself,  and  some 
imputation  of  guilt  to  employers  is  thus  implied. 
Let  us,  then,  consider  whether  or  not  labourers 
employed  by  corporations  suffer  thereby  any  pe- 
culiar injustice. 


CHAPTER  IV. 

THE  STATUS  OF  LABOURERS  EMPLOYED  BY 
CORPORATIONS. 

The  legal  maxim,  "  Corporations  have  no 
souls,"  is  without  doubt  interpreted  literally  by 
ordinary  people.  They  reason  that  when  the 
employees  of  a  corporation  rebel  against  the 
terms  of  their  employment,  the  suffering  must  be 
all  theirs.  The  corporation  has  no  feeling;  it 
can  not  suffer  from  anxiety  or  hunger  or  fear. 
The  stockholders  may,  of  course,  be  disquieted, 
but  their  sufferings  can  not  be  very  keen.  As 
they  have  no  personal  contact  with  the  work- 
men, they  are  not  unpleasantly  involved  in  the 
dispute,  and  the  loss  from  the  suspension  of  busi- 
ness is  not  ordinarily  so  severe  as  to  cause  most 
of  them  great  inconvenience. 

The  active  managers  of  the  corporation,  it  is 

true,  may  be  subjected  to  a  severe  strain.     Their 

responsibility  becomes  extremely  great,  and  they 

may  even  be  put  in  peril  of  their  lives.     At  all 

events,  they  become  objects  of  hatred,  and  are 

29 


30  JNi*l  .^1  KiAi,    I'KKKDOM. 

exposed  to  storms  of  vitiipcratifm.  But,  after 
all,  these  inaiia.i;ers  are  few,  while  the  workmen 
are  many.  Perhaps  no  one  individual  among 
them  sulTers  so  nnich  as  the  individual  manager; 
hut  wc  are  accustomed  to  count  sufferings  as 
well  as  weigh  them.  If  there  are  a  hundred  men 
on  one  side  and  only  one  on  the  other,  it  cer- 
tainly seems  better  that  the  one  should  sufTer 
rather  than  the  lunulrcd. 

Were  there  nothing  else  to  be  considered,  it 
would  be  hard  to  refuse  our  assent  to  this  propo- 
sition. But  we  must  be  on  our  guard  against  a 
fallacy  of  composition.  We  are  dealing  with  in- 
dividuals, and  the  question  is  whether  the  sin- 
gle workman,  when  employed  by  a  corporation, 
is  or  is  not  more  of  a  slave  than  when  w^orking 
for  an  ordinary  employer.  However  it  may 
affect  society  at  large,  the  sufferings  of  the  indi- 
\-i(lual  workman  are  all  that,  as  an  individual,  he 
can  complain  of.  Doubtless  he  is  moved  by  sym- 
pathy with  his  fellows  and  affected  by  their  as- 
pirations; but  such  emotions  constitute  no  limi- 
tati(^ns  of  his  freedom.  I  lis  particular  grievances 
must  always  be  low  wages  and  lack  of  employ- 
ment, and  the  corporate  form  of  enterprise  can 
not  be  assumed  to  create  or  aggravate  these 
evils.  It  can  not  be  arbitrarily  maintained  that 
the  managers  of  these  enterprises  are  more  bru- 


LABOURERS  EMPLOYED  BY  CORPORATIONS.    3 1 

tal  and  hard-hearted  than  the  managers  of  un- 
incorporated concerns.  No  doubt  masters  that 
employ  only  a  few  workmen  have  better  oppor- 
tunities to  cultivate  kindly  relations  with  them; 
but  they  are  also  better  able  to  tyrannize  over 
them,  and  it  is  well  known  that  such  tyranny 
has  not  been  uncommon  in  the  past. 

Conceding  that,  to  some  extent  at  least,  com- 
pulsion may  take  place  without  the  application 
of  force,  and  that  practical  restraints  on  the  ca- 
pacity to  contract  may  coexist  with  legal  free- 
dom, we  must  ask  in  what  way  the  corporate  or- 
ganization of  industry  favours  these  results. 
Such  compulsion  and  restraint  must  take  place 
through  the  operation  of  motives.  What  mo- 
tives can  the  managers  of  corporations  suggest 
to  their  men  with  the  result  of  Hmitine  their 
freedom?  Whatever  they  are,  they  must  belong 
to  one  of  two  classes:  they  must  appeal  either 
to  the  hope  of  gain  or  to  the  fear  of  loss. 

It  might  not  at  first  seem  possible  that  any 
limitation  of  freedom  could  result  from  the  op- 
eration of  such  a  motive  as  the  hope  of  gain. 
If  the  gain  be  secured,  freedom  would  so  far  be 
extended.  But,  if  we  consider  the  matter 
closely,  the  danger  appears  to  be  real.  The 
managers  of  some  corporations  have  devised 
schemes  for  assuring  pensions  and  death  or  acci- 


32  INDUSTRIAL    FREEDOM. 

(Init  Itciuliis  to  tlu-ir  employees.  These  schemes 
involve  the  investment  of  some  portion  of  their 
watj^cs  by  the  men,  and  it  is  (luitc  possible  that 
niidcr  some  of  them  a  man  Icavinj,^  the  service 
of  the  company,  cilhcr  voluntarily  or  by  dis- 
charge, would  lose  what  he  had  invested.  It 
would  thus  be  practicable  for  the  company  to 
supplement  the  hope  of  gain  by  the  fear  of  loss. 
It  might  reduce  wages  below  the  market  rate, 
and  yet  its  men  would  I'lnd  that  they  would  lose 
more  than  they  would  gain  by  changing  masters, 
and  might  complain  that  they  had  parted  with 
their  freedom.  But  as  this  evil  has  perhaps  not 
actually  occurred,  and  as  it  seems  possible  to  cor- 
rect it  by  ])roi)er  legislation  if  it  should  occur, 
it  need  not  be  seriously  considered  except  by  way 
of  warning. 

More  deserving  of  scrutiny  is  the  plan  adopted 
by  some  corporations  of  inducing  their  workmen 
to  become  owners  of  houses  near  their  place  of  la- 
bour. Where  nearly  all  the  industries  in  a  small 
town  or  village  are  in  the  hands  of  one  or  two 
corporations,  as  is  frequently  the  case,  it  may 
be  impossible  for  a  workman  discharged  by  one 
of  these  employers  to  find  other  work  in  that  lo- 
cality. If  he  has  invested  his  savings  in  a  house, 
he  may  seem  to  have  become  to  a  certain  extent 
otiscriptiis  gkbcc.     He  may  have  only  partly  paid 


LABOURERS   EMPLOYED   BY   CORPORATIONS.         33 

for  his  house,  and  if  his  wages  cease  he  will  be 
unable  to  complete  his  payments,  and  may  lose 
his  property  by  foreclosure.  Even  if  it  is  free 
from  incumbrance,  he  may  be  unable  to  sell  it 
or  to  rent  it.  Should  the  corporation  become 
insolvent  and  cease  to  do  business,  all  the  houses 
in  such  a  town  would  depreciate  in  value,  and 
many  of  them  would  become  practically  worth- 
less. Under  such  circumstances  the  managers  of 
the  corporation  apparently  have  it  in  their  power 
to  compel  such  workmen,  by  the  threat  of  dis- 
missal, to  accept  lower  wages  than  are  elsewhere 
paid. 

It  may  be  questioned,  however,  if  this  has 
ever  taken  place,  or  is  likely  to  take  place  to  a 
serious  extent;  and  even  if  it  were  common,  it 
does  not  necessarily  follow  that  the  ownership  of 
a  home  tends  on  the  whole  to  reduce  workmen 
to  a  condition  of  slavery.  "  He  that  hath  wife 
and  children  hath  given  hostages  to  Fortune"; 
but  the  happiness  of  family  life  must  be  regarded, 
all  things  considered,  as  more  than  compensating 
for  its  peculiar  cares.  Whatever  bad  qualities  are 
popularly  ascribed  to  the  managers  of  corpora- 
tions, it  is  notorious  that  they  are  universally 
animated  by  a  desire  to  secure  good  and  steady 
workmen.  Men  that  have  families  and  own  their 
homes  are  generally  of  this  character,  and  they 


34  INDUSTIUAI-    FUKKDOM. 

will  1)0  llic  last  to  l)c  discharged  when  it  becomes 
necessary  to  reduce  the  working  force. 

Moreover,  unless  all  the  employees  of  the  cor- 
poration arc  somehow  affixed  to  the  soil  by  own- 
ership, it  will  not  be  practicable  to  reduce  wages 
below  the  rate  elsewhere  current  without  dis- 
charging some  of  the  workmen.  Without  a  re- 
duction of  numbers,  a  reduction  of  wages  would 
lead  what  may  be  called  the  floating  element 
among  the  workmen  to  obtain  employment  else- 
where. Hence,  unless  it  was  intended  to  curtail 
business,  wages  would  not  be  reduced.  If  un- 
der such  circumstances  wages  are  reduced,  the 
step  must  be  made  necessary  by  unprofitable  busi- 
ness. The  landowning  workmen  may  thus  be 
led  to  submit  to  a  reduction  of  wages  which 
those  who  do  not  own  land  can  avoid  by  emigra- 
tion; but  even  then  their  condition  may  be  on 
the  whole  preferable.  The  saving  in  rent,  and 
the  other  advantages  connected  with  proprie- 
torship must  freciuently  outweigh  whatever  loss 
arises  from  reduced  wages,  if  we  are  correct 
in  arguing  that  such  reduction  is  made  im- 
perative by  the  depressed  condition  of  trade. 
Nor  should  we  disregard  the  loss  of  time 
and  other  expenses  incurred  by  those  who 
change  their  place  of  employment,  nor  the  fact 
that  reduced  wages  are  usually  accompanied  by 


LABOURERS   EMPLOYED   BY   CORPORATIONS.       35 

lower  prices  for  the  goods  consumed  by  work- 
men. 

It  seems,  therefore,  to  be  proper  to  conchide 
that  the  employees  of  corporations  do  not  suffer 
any  material  limitations  of  freedom  by  yielding  to 
temptations  to  improve  their  condition  presented 
by  their  employers.  Were  the  conclusion  dif- 
ferent, it  would  still  be  impossible  to  show  that 
in  this  regard  the  employees  of  corporations  are 
at  a  disadvantage  as  compared  with  the  em- 
ployees of  individuals.  In  general,  it  is  true  that 
such  limitations  of  freedom  are  most  likely  to 
take  place  elsewhere  than  at  the  centres  of  indus- 
try, and  outside  of  these  centres  the  individual 
employers  of  labour  are  much  more  numerous 
than  the  corporations.  As  a  rule,  it  must  be 
added,  they  are  in  better  position  than  managers 
of  corporations  either  to  benefit  or  to  injure  their 
employees  by  taking  the  control  of  their  savings. 
Where  corporations  abound,  we  may  be  sure  of 
finding  savings  banks,  which  afford  reasonably 
safe  investment  for  the  earnings  of  poor  people. 
Where  there  are  few  corporations,  there  are  no 
savings  banks,  and  the  working  people  are 
obliged  to  intrust  their  accumulations  to  more 
or  less  irresponsible  individuals. 

It  remains  to  consider  how  far  it  is  in  the 
power  of  the  managers  of  corporations  to  limit 


3^  INDUSTRIAL    FREEDOM. 

till-  fni'flnm  of  iluir  men  l>y  api)caling  to  their 
fears.  As  we  have  seen,  the  apphcation  of  force, 
or  physical  pain,  is  no  lon^a-r  allowed,  and  Icjjal 
proccedinj^s  against  defendants  proof  aj^ainst 
execution  are  disastrous  remedies  for  the  plain- 
tilTs.  The  only  available  means  of  arousing  the 
fears  of  workmen,  as  such,  is  by  threatening  them 
with  lower  wages.  All  other  forms  of  what  is 
spoken  of  as  "  corporate  tyranny  "  can  be  re- 
duced to  this. 

The  demand  that  men  shall  work  longer  hours 
for  the  wages  now  paid  for  a  shorter  day  is  ob- 
viously the  same  thing  as  a  reduction  of  wages. 
1  he  demand  that  men  shall  perform  more  work 
or  do  it  better  within  the  established  hours  is 
in  effect  the  same.  The  exaction  of  fines,  the 
adoption  of  vexatious  rules,  all  amount  to  a 
diminution  of  the  compensation  received  by 
workmen  for  their  labour.  In  short,  whatever 
increases  the  sacrifice  involved  in  the  toil  of  the 
w'orkman  without  giving  him  additional  recom- 
pense in  efTect  reduces  wages.  Adam  Smith  said 
of  certain  indefinite  exactions  that  their  amount 
might  be  measured  by  what  men  were  willing  to 
pay  to  get  rid  of  them.  So  with  every  require- 
ment on  the  part  of  the  employer:  it  is  weighed 
by  the  workman  against  the  wages  that  he  re- 
ceives.    It  mav  be  added  that  dismissal,  or  the 


LABOURERS   EMPLOYED   BY   CORPORATIONS.      3/ 

total  deprivation  of  employment,  although  not 
precisely  the  same  thing  as  a  reduction  of  wages, 
differs  from  it  only  in  degree. 

To  what  extent,  then,  can  the  managers  of 
corporations  go  in  enslaving  their  employees  by 
reducing  their  wages?  The  limit  appears  to  be 
a  plain  one.  If  the  workman  considers  that  the 
loss  involved  in  submitting  to  a  reduction  of, 
wages  will  be  greater  than  that  incurred  in  seek- 
ing other  employment,  the  presumption  is  that 
he  will  not  submit.  The  master,  therefore,  when 
he  knows  that  other  employment  can  be  ob- 
tained by  his  workmen  at  as  good  wages  as  he 
offers  them,  will  not  attempt  to  reduce  wages. 
To  do  so  would  result  in  depriving  himself  of 
labour,  and  putting  a  stop  to  his  business,  unless 
he  could  obtain  a  new  force.  If  his  former  force 
were  able  to  find  places  at  the  higher  rate  of 
wages,  it  is  evident  that  a  new  force  willing  to 
work  for  lower  wages  would  not  be  obtainable, 
or,  if  obtainable,  that  it  w^ould  consist  of  inferior 
workmen.  But  to  employ  inferior  workmen  at 
lower  wages  is  seldom  an  economy.  They  cost 
more  than  better  men  better  paid. 

It  follows,  therefore,  that  managers  of  cor- 
porations can  effectively  adopt  the  measure  of 
reducing  wages  only  when  the  conditions  of  busi- 
ness are  such  as  to  make  a  general  reduction  of 


432971 


38  INDIM  KIAI.     lUKI.DoM. 

wages  i)ra(tiiaI>U'  or  necessary.  And  it  is  plain 
that  as  a  general  rule,  when  such  cf)n(litions  pre- 
vail, managers  of  corporations  must  adjust  their 
alTairs  to  them.  We  must  assume  that  corpora- 
tions engaged  in  business  have  to  meet  competi- 
tion in  disi)Osing  of  their  products,  and  the  man- 
ager that  undertakes  to  pay  higher  wages  than 
are  paid  by  his  competitors — the  efficiency  of  the 
labourers  employed  being  the  same — will  be  at  a 
disadvantage.  He  can  not  afford  to  dispose  of 
his  products  at  a  less  price  than  before.  They 
can,  and  they  will  secure  his  former  customers. 
There  are  many  exceptions  to  such  general  prop- 
ositions as  these,  some  of  which  are  of  such  im- 
portance as  to  require  special  consideration;  but 
on  the  whole,  and  in  the  long  run,  the  correct- 
ness of  these  conclusions  can  hardly  be  contro- 
verted. If  they  are  valid,  it  necessarily  follows 
that  the  managers  of  corporations  as  a  class  can 
appeal  to  the  fears  of  their  workmen  no  more 
effectively  than  other  employers  of  labour;  that 
they,  like  other  employers,  are  controlled  by  the 
conditions  of  business  in  raising  or  lowering 
wages;  and  that  "industrial  slavery."  if  it  may 
be  said  to  exist  at  all.  prevails  as  well  among  the 
employees  of  private  individuals  as  among  those 
of  corporations. 


CHAPTER  V. 

SOME    EXCEPTIONS    CONSIDERED. 

The  conclusions  reached  in  the  last  chapter 
are  of  a  very  general  character,  and  are  therefore 
subject  to  many  exceptions.  While  it  may  be 
conceded  that,  as  a  rule,  the  manager  of  a  cor- 
poration possesses  no  special  powers  of  oppres- 
sion, the  belief  unquestionably  prevails  that  this 
is  not  true  of  the  managers  of  all  corporations. 
If  the  corporation  employs  a  very  large  number 
of  men,  or  if  it  is  especially  strong  in  its  financial 
resources,  or  if  it  possesses  a  monopoly  of  a  cer- 
tain branch  of  industry — in  any  of  these  cases, 
and  still  more  when  all  these  conditions  are  com- 
bined in  one  case,  the  causes  that  usually  deter- 
mine the  rate  of  wages  may  be  counteracted. 
The  arbitrary  determination  of  a  few  domineering 
men  may  then  be  more  potent  than  the  law  of 
supply  and  demand,  and  they  may,  for  a  time  at 
least,  secure  excessive  profits,  while  they  are  co- 
ercing their  employees  into  accepting  diminished 
wages. 

4  39 


40  INDfSTKI.M.    lUi.l.lJDM. 

In  tlio  first  f)f  these  cases,  it  may  be  con- 
tended, the  j^aeat  number  of  workmen  suljject 
to  the  (hrection  of  a  single  employer  of  itself  ren- 
ders the  theory  of  a  free  labour  market  unten- 
able. If  an  individual  cmj)loyer  discharges  a 
single  servant,  it  may  be  easy  for  the  servant  to 
find  other  work;  but  if  a  corporate  employer 
discharges  a  thousand  servants  at  once,  it  can  not 
l»e  possible  for  such  a  nutnbcr  to  fnid  work  with- 
out greatly  disturbing  the  rate  of  wages.  There 
can  not  be  places  for  them  all,  and  they  can  only 
get  places  by  underbidding  those  who  have  them 
already.  The  men  understand  the  situation,  and, 
rather  than  encounter  the  suffering  that  will  re- 
sult from  being  discharged,  they  submit  to  that 
involved  in  reduced  wages.  Of  course,  there  is 
a  limit  to  such  oppression.  Those  who  contend 
that  it  exists  do  not  maintain  that  wages  can  be 
reduced  indefinitely  by  the  mere  fiat  of  the  em- 
ployer; but  they  think  that  there  is  a  kind  of 
"  zone  "  where  the  employer  is  supreme.  He  not 
only  gets  out  of  his  labourers  all  that  the  indus- 
trial conditions  justify,  but  also  all  that  his  dispro- 
portionate power  enables  him  to  exact.  The  la- 
bourers yield  because  of  their  fears.  They  do  not 
know  where  else  to  look  for  work;  they  are  at- 
tached to  their  present  abode;  they  are  perhaps 
too  poor  to  incur   the  expense  of  moving,   or, 


SOME    EXCEPTIONS    CONSIDERED.  4I 

if  not,  they  are  reluctant  to  expend  their  lit- 
tle savings  in  uncertain  ventures.  They  may 
not  permanently  submit  to  such  exactions, 
but  for  a  time,  at  least,  they  will  endure  familiar 
ills  rather  than  fly  to  others  that  they  know 
not  of. 

Doubtless  such  a  situation  as  this  is  theoret- 
ically possible;  but  before  we  undertake  to  rea- 
son from  it  we  must  define  it  much  more  pre- 
cisely. It  must  be  admitted  that  employers  of 
labour  for  the  purpose  of  profit,  whether  individ- 
uals or  corporations,  are  under  constant  pressure 
to  reduce  the  cost  of  production,  in  which  the 
wages  account  is  usually  the  principal  item.  If 
there  is  a  "  zone  "  on  which  encroachments  can 
'be  made,  competition  will  make  it  impossible  for 
the  most  benevolent  of  employers  to  refrain  from 
encroachment.  We  are,  of  course,  assuming  that 
the  qualities  of  the  workmen  are  the  same,  and 
that  the  conditions  of  employment  do  not  ma- 
terially differ.  We  must  also  have  it  in  mind 
that  no  conclusions  in  such  matters  are  perfectly 
accurate,  but  that  all  that  we  can  possibly  attain 
to  in  the  way  of  general  laws  is  the  statement 
of  averages  and  the  establishment  of  tendencies. 
With  these  limitations,  it  appears  true  that  unless 
the  employer  is  protected  in  the  sale  of  his  product 
from  the  competition  of  other  employers,  he  must 


•  12  INDUSTRIAf,    I  Ul  I.Do.M. 

ordinarily  reduce  his  wages  account  to  correspond 
with  theirs.  Under  free  competition,  therefore, 
there  could  he  no  such  "  zone  "  as  is  imagined. 
If  invaded  hy  one  employer,  it  would  quickly  be 
occupied  by  all.  In  other  words,  the  rate  of 
wages  within  the  supposed  "zone,"  or  "mar- 
gin." is  regulated  by  the  conditions  of  business, 
and  not  by  the  arbitrary  fiat  of  individual  men. 
Wages,  in  every  particular  case,  are  fixed  by  vol- 
untary agreement;  but  the  terms  of  the  agree- 
ment are  fixed  by  circumstances.  The  theory  of 
a  "  zone  "  is  true  in  the  sense  that  wages  and 
profits  lluctuate;  but  it  involves  a  fallacy  of  com- 
position if  it  means  that  employers  as  a  class 
can  at  all  times  afTord  to  pay  higher  wages  than 
they  do  pay. 

The  magnitude  of  the  corporation  has  no 
bearing  on  this  conclusion.  The  manager  of  a 
great  corporation,  if  he  is  to  be  successful,  must 
adopt  the  same  methods  as  the  manager  of  a 
small  one.  However  he  may  be  described  by 
our  newspaper  writers  and  legislators,  as  a  matter 
of  fact  he  does  not  desire  to  employ  slave  labour. 
He  would  rather  have  well-fed  than  ill-fed  work- 
men, contented  than  discontented,  hopeful  than 
disheartened,  friendly  than  hostile,  workmen. 
He  will  give  up  his  preferences  in  this  matter 
rather  than  surrender  the  control  of  his  property. 


SOME    EXCEPTIONS    CONSIDERED.  43 

and  abdicate  the  management  of  his  business. 
But  so  far  as  the  rate  of  wages  is  concerned,  no 
employer,  great  or  small,  corporation  or  individ- 
ual, wishes  his  servants  to  think  that  they  are 
working  for  him  for  less  compensation  than  they 
can  obtain  elsewhere.  He  may  be  willing  to 
profit  by  their  ignorance;  but  unless  his  business 
is  diminishing  he  will  be  unwilling  to  stir  up 
their  discontent.  As  a  matter  of  fact,  it  is  prob- 
able that  the  compensation  received  by  the  em- 
ployees of  large  corporations  is,  all  things  consid- 
ered, rather  above  the  compensation  of  labourers 
in  general.  The  money  wages  paid  to  unskilled 
workmen  by  these  corporations  may  be  very 
small;  such  workmen  seldom  command  high 
wages  from  any  employer.  But  if  we  take  into 
consideration  the  regularity  of  employment,  the 
conditions  under  which  it  is  carried  on,  and  the 
comparative  certainty  of  payment,  it  is  difficult 
to  maintain  that  they  are  not  on  the  whole  bet- 
ter ofif  than  if  they  were  serving  individual  em- 
ployers. When  Homer  wished  to  depict  the  ex- 
treme of  misery,  he  instanced  the  lot  of  the  poor 
man's  slave,  and  few  labourers  would  to-day  pre- 
fer the  service  of  an  impecunious  to  that  of  a 
wealthy  master. 

We  have  turned  aside  a  little  from  the  con- 
sideration of  the  possibility  of  the  wholesale  dis- 


44  INDISI  KIAI-    rRF.F.noM. 

charge  of  workmen  by  the  managers  of  a  great 
corporation,  ami  tlie  use  of  such  a  possiljiHty 
as  a  means  of  reducing  wages.  It  can  scarcely 
be  contended  that  such  a  measure  would  be  re- 
setted to  when  trade  was  prosperous.  Conced- 
ing; the  power  to  exist,  there  would  be  no  motive 
for  its  exercise.  If  the  men  refused  to  accept 
reduced  wages  and  were  discharged,  the  corpora- 
tion would  sulTer  great  loss,  and  in  the  case  sup- 
posed would  be  unable  to  supply  its  wants,  ex- 
cept with  the  refuse  of  the  labour  market.  But, 
it  may  be  thought,  the  case  is  altered  when  trade 
is  depressed.  The  profits  of  the  corporation  arc 
reduced  or  cut  off  altogether,  and  in  order  to  pre- 
serve or  restore  them,  the  managers  insist  that 
the  men  shall  receive  less  compensation.  At  such 
a  time  the  employer  would  perhaps  be  glad  to 
suspend  operations  completely.  The  men,  know- 
ing that  wages  are  falling  elsewhere,  may.  in  view 
of  the  possibilities  of  loss,  be  led  to  accept  such  a 
reduction  as  enables  the  corporation  to  continue 
to  make  the  same  profits  as  before.  The  labourer 
employed  by  the  small  employer  might  be  will- 
ing to  take  his  chance  of  finding  other  work,  if 
any  excessive  reduction  of  wages  were  proposed; 
but  when  a  large  number  of  labourers  are  afTected 
they  know  that  many  of  them,  if  the  whole  body 
were  discharged,  would  probably  for  a  consid- 


SOME    EXCEPTIONS    CONSIDERED.  45 

erable  time  find  it  impossible  to  obtain  any  em- 
ployment at  all. 

Upon  careful  consideration,  it  appears  to  me 
theoretically  possible  for  some  great  corpora- 
tions, under  these  circumstances,  to  reduce  the 
wages  of  their  workmen  temporarily  to  a  figure 
lower  than  that  at  which  they  could  find  em- 
ployment elsewhere.  A  great  manufacturing 
corporation,  for  example,  whose  works  are  in  an 
isolated  location,  may  conceivably  take  advan- 
tage of  its  workmen  in  this  way.  It  is  possible 
that  this  conception  may  have  been  sometimes 
actually  realized,  but  the  facts  are  notoriously 
against  it.  In  the  first  place,  the  greatest  cor- 
porations are  the  railroads,  and  they  are  entirely 
unable  to  stop  their  operations.  The  hmit  to 
which  they  can  go  in  reducing  wages  is  fixed  by 
the  conditions  of  business.  They  must  have  a 
working  force,  and  they  can  not  fix  wages  at  a 
rate  lower  than  that  at  which  they  can  obtain 
workmen  to  take  the  place  of  those  who  quit 
their  service.  If  they  did  so  they  would  tie  their 
own  hands.  But  whatever  regret  is  felt  over  a 
reduction  of  wages  to  such  a  rate  as  this,  must 
be  based  on  some  other  ground  than  its  injustice 
to  labourers  as  a  class.  The  loss  experienced  by 
the  labourers  who  are  discharged  is  offset  by  the 
gain  made  by  those  who  take  their  places,  for 


4^i  INDUSTRIAL    FKF.F.Df )Nf . 

these    latter    arr    jjrcsimiiitivcly    bettering    llicir 
condition. 

I'liit  imicli  inf)rc  than  this  is  true.  It  is  well 
known  that  a  lar^c  number  of  our  ^rcat  railways 
arc-  insolvent.  They  pay  nothinj^  to  their  stock- 
In  •Idcrs.  and  only  a  portion  of  what  they  owe 
tlitir  bondholders,  if  they  ])ay  thcni  anything. 
Under  such  circumstances  it  is  evident  that  they 
continue  to  pay  their  employees  not  only  all  that 
their  services  arc  worth,  but  m(;rc  than  they  are 
wortli.  They  can  earn  neither  interest  nor  divi- 
dends while  they  continue  to  pay  such  wages; 
nevertheless  they  continue  to  pay  tliem.  The 
stockholders  and  bondholders  thus  contribute  to 
pay  to  a  large  number  of  labourers  higher  wages 
than  they  really  earn.  It  would  certainly  seem 
that  these  great  corporations,  so  far  from  having 
it  in  their  power  to  oppress  and  enslave  their 
workmen,  are  really  in  their  workmen's  power. 
It  may  be  added  that  the  Federal  courts,  which 
have  been  denounced  as  hostile  to  labourers, 
have  in  some  instances  compelled  the  receivers 
of  insolvent  railroads  to  apply  their  revenues  to 
the  payment  of  higher  wages  than  those  for  which 
they  could  obtain  satisfactory  service.  This  may 
be  regarded  as  unjust  by  bondholders,  and  as 
partial  by  unemployed  labourers,  who  would  be 
glad  to  work  at  the  lower  rates;  but  it  affords 


SOME    EXCEPTIONS    CONSIDERED.  47 

no  support  to  the  view  that  these  great  corpora- 
tions have  any  exceptional  power  of  forcing  un- 
reasonably low  wages  on  their  men.* 

In  the  second  place,  we  must  not  disregard  the 
fact  that  it  is  a  severe  blow  to  the  welfare  of  any 
corporation,  and  perhaps  especially  to  a  great 
manufacturing  corporation  carrying  on  its  opera- 
tions in  an  isolated  place,  to  disperse  a  corps  of 
workmen.  It  is  perhaps  too  often  assumed  that 
for  the  purposes  of  such  a  corporation  one  labour- 
er is  as  good  as  another,  and  that  new  hands  are  as 
good  as  old.  Those  who  have  any  acquaintance 
with  the  conduct  of  manufactures  will  not  make 
this  mistake.  For  many  purposes  the  compo- 
sition of  the  rank  and  file  is  not  very  important. 
Where  little  skill  is  required,  supervision  will  gen- 
erally secure  proper  work.  But,  in  most  manu- 
factures, skilled  labour  is  important,  and,  in  all, 
trustworthy  supervisors  or  foremen  are  indispen- 
sable. No  prudent  manager  will  disband  a 
trained  and  disciplined  body  of  men  if  he  can 
help  it.  He  will  rather  suffer  some  loss  to  retain 
them.  As  a  matter  of  fact,  there  are  numberless 
instances  of  this.     Not  every  reduction  of  profits 

*  The  United  States  Commissioner  of  Labour  declares  positively 
that  the  wages  paid  by  railroads  are  higher  than  the  current  rate. 
"There  has  never  been  a  time,"  he  says,  "  in  the  history  of  railroads, 
when  men  did  not  stand  ready  to  fill  a  labour  vacancy  at  the  wages 
fixed  by  the  railroads." 


48  INDUSTRIAL    FREEDOM. 

makes  a  reduction  of  waj^cs  necessary  or  wise. 
We  need  not  attribute  benevolent  motives  to  the 
managers  of  corporations  wbo  recognise  this 
truth,  aUhough  we  should  not  always  be  mis- 
taken in  so  doing.  They  need  only  to  be  actu- 
ated by  an  enlightened  self-interest,  and  so  much 
sagacity  as  this  it  is  reasonable  to  concede  to 
them.* 

We  have  so  far  considered  the  power  of  great 
corporate  employers  over  labourers  as  posi- 
tively displayed  in  the  reduction  of  wages.  It 
remains   to   incjuire   as   to  its   negative   exercise 

*  It  is  hardly  necessary  to  say  that  the  notion  that  employers 
can  fix  the  rate  of  wages  according  to  their  will  is  not  of  modem 
origin.  Macaulay  quotes  a  ballad  of  about  16S5  in  which  a  master 
clothier  says  : 

"  In  former  ages  we  used  to  give, 
So  that  our  workfolks  like  farmers  did  live  ; 
But  the  times  are  changed,  we  will  make  them  know. 

We  will  make  them  to  work  hard  for  sixpence  a  day, 
Thout;h  a  shilling  they  deserve  if  they  had  their  just  pay  ; 
If  at  all  they  murmur  and  say  'tis  too  small. 
We  bid  them  choose  whether  they'll  work  at  all. 
And  thus  we  do  gain  all  our  wealth  and  estate. 
By  many  poor  men  that  work  early  and  late." 

Compare  this  with  the  course  of  one  of  the  "  coal  robbers,"  the 
Delaware  and  Hudson  Canal  Company,  which  now  pays  the  holders 
of  its  stock  and  bonds  about  $2,100,000  annually,  while  it  pays  for 
labour  over  $g,ooo,ooo.  It  has  $35,000,000  in  stock,  $5,000,000  in 
bonds,  total,  $40,000,000;  and  within  five  years  it  has  paid  laboureis 
more  than  $44,000,000. 


SOME    EXCEPTIONS    CONSIDERED.  49 

in  the  failure  to  raise  wages  when  profits  increase. 
A  Httle  reflection,  however,  is  enough  to  show 
that  the  cases  are  substantially  parallel,  and  it 
would  be  tedious  to  repeat  the  preceding  argu- 
ment in  detail.  To  a  considerable  extent,  when 
trade  is  prosperous  and  wages  tend  to  rise,  the 
workman's  fears  give  place  to  hopes.  If  his  em- 
ployer does  not  raise  his  wages  to  such  a  rate  as 
elsewhere  prevails,  he  thinks  that  he  will  better 
his  condition  by  a  change,  and  he  is  therefore  dis- 
posed to  press  his  advantage  as  far  as  possible. 
The  employer,  on  the  other  hand,  is  anxious  to 
'*  make  hay  while  the  sun  shines,"  and  will  think 
it  for  his  advantage  to  pay  something  more  than 
the  current  rate  of  wages,  rather  than  to  have 
his  business  interrupted  by  changing  his  work- 
ing force.  It  is  now  the  workmen  that  can  ap- 
peal to  the  fears  of  the  employers,  and  although 
they  are  frequently  prevented  by  their  ignorance 
from  pressing  their  advantage  to  the  utmost, 
they  are  perhaps  generally  disposed  to  insist  upon 
it  to  the  extent  of  their  knowledge.  Much  could 
be  said  in  support  of  the  view  that  in  this  way  a 
certain  average  of  justice  is  maintained,  and  that 
if  great  corporations  drive  hard  bargains  with 
their  workmen  when  trade  is  declining,  their 
workmen  are  correspondingly  exacting  when 
prosperity  returns.     But  it  is  hardly  worth  while 


50  INDUSTRIAL    FRKEDOM. 

In  ciilarf^c  upon  this,  for  it  is  (|iiitc  clear  that 
in  a  period  of  risiiii^  vvaj^cs  ^rcat  corporations 
have  no  "  (hsproportionatc  power"  over  tlieir 
workmen.  Jf  they  were  to  discharge  them  as  a 
body,  they  wonld  find  it  practically  impossihle 
to  fill  their  places  except  at  great  expense.  If 
they  attempt  to  crowd  upon  the  "  zone  "  into 
which  wages  graduate,  they  will  find  that  work- 
men are  leaving  them  at  a  time  when  it  is  for  their 
advantage  to  increase  their  force. 

Taking  everything  into  consideration,  we 
seem  justified  in  concluding  that  corporations 
employing  a  large  number  of  workmen  do  not 
possess  by  virtue  of  their  mere  magnitude  any 
exceptional  power  of  oppression.  They  can 
cause  no  more  sufifering  to  an  individual  work- 
man than  can  be  caused  by  other  employers;  and 
when  we  set  the  whole  body  of  the  employees 
against  their  corporate  master,  and  weigh  the 
loss  and  injury  which  they  can  inflict  against 
what  they  may  sufTer,  the  inequality  between  the 
parties  is  not  very  manifest.  Indeed,  when  we 
consider  the  difl^culty  of  suddenly  procuring  a 
great  force  of  labourers  capable  of  carrying  on 
the  work  of  the  corporation,  we  see  that  its  very 
magnitude  makes  it  more  dependent  and  helpless. 

We  may  now  proceed  to  examine  more  par- 
ticularly the  contention  that  such  corporations 


SOME    EXCEPTIONS    CONSIDERED.  5 1 

as  have  exceptionally  great  wealth  have  excep- 
tional power  over  their  workmen.  In  such 
cases  it  is  commonly  believed  that  the  arbitrary 
fiat  of  a  few  arrogant  men  can  override  the  laws 
of  supply  and  demand.  It  appears  to  be  thought 
that  the  resources  at  their  command  enable  them 
to  coerce  their  workmen  into  accepting  lower 
w^ages  than  might  fairly  be  claimed,  while  profits 
are  maintained  at  excessive  figures.  From  the 
ordinary  necessities  of  employers  such  men  are 
supposed  to  be  exempt.  They  are  in  position  to 
endure  the  losses  resulting  from  a  temporary 
stoppage  of  their  business;  or,  at  least,  they  can 
much  better  endure  such  losses  than  their  em- 
ployees can  endure  the  loss  of  their  wages.  The 
employees  may  be  able  to  hold  out  for  a  while 
with  the  aid  of  such  little  savings  as  they  have 
made,  but  these  savings  will  soon  be  exhausted; 
they  are  sufficient  for  a  single  battle,  but  not 
for  a  long  campaign.  Their  employers,  however, 
can  not  be  overcome  in  a  single  battle.  Hence, 
they  can  not  be  overcome  at  all,  and  the  strike, 
the  only  military  measure  available  to  workmen, 
is  sure  to  be  disastrous  to  them.  If  they  resort 
to  it  they  are  only  playing  into  their  opponents' 
hands.  When  it  is  over,  and  they  are  obliged 
to  admit  the  defeat  which  they  might  have  known 
to  be  inevitable,  they  are  far  more  helpless  than 


52  INDUSTRIAL    FREEDOM. 

before,  riicir  savings  are  dissipated,  tlicir  cour- 
age is  gone,  and  they  arc  at  the  mercy  of  their 
masters.  Like  the  wretched  iniiabitants  of  Car- 
thage, after  their  weapons  have  been  taken  from 
them  and  resistance  is  hopeless,  they  are  offered 
the  alternative  of  starvation  or  slavery. 

No  better  illustration  of  such  a  situation  as 
is  above  described  can  be  asked  than  the  strike 
of  the  employees  of  the  Pullman's  Palace  Car 
Company  in  1894.  This  company  not  only  car- 
ried on  very  extensive  operations,  but  also  pos- 
sessed exceptional  financial  resources.  The  par 
value  of  its  capital  stock  in  1893  was  $36,000,- 
000.  Without  debt,  with  revenue  amounting  to 
over  $11,000,000,  with  expenses  of  less  than 
$5,000,000,  after  having  paid  dividends  since 
1877  never  less  than  eight  per  cent,  it  had  ac- 
cumulated an  apparent  surplus  of  over  $25,- 
000,000.  The  business  of  the  company  having 
greatly  fallen  ofT  in  1893,  some  of  its  shops  were 
closed,  and  the  number  of  workmen  employed 
was  very  much  diminished.  It  was  found  by  the 
officers  of  the  company,  after  diligent  inquiry, 
that  a  good  deal  of  business  was  to  be  had,  but 
at  vr  y  unremunerative  rates.  They  decided  to 
secure  this  business  by  bidding  for  contracts  at 
such  figures  as  would  afi"ord  no  profit,  and  as 
would  require  a  considerable  reduction  of  wages 


SOME    EXCEPTIONS    CONSIDERED.  53 

in  order  to  avoid  a  positive  loss.  They  knew  that 
higher  bids  than  those  made  by  them  would  have 
no  chance  of  acceptance,  and  as  a  matter  of  fact 
they  were  underbid  on  a  number  of  contracts. 
This  reduction  of  wages  was  accordingly  put  in 
force,  and  against  it  the  men  struck,  with  the 
far-reaching  results  so  well  known  to  the  world. 
After  a  long  period  of  idleness  a  number  of  them 
yielded  to  the  necessities  of  the  situation  and 
returned  to  work  at  the  company's  terms,  the 
remainder  disappearing  from  the  scene  and  giv- 
ing place  to  newcomers. 

This  episode  was  in  many  ways  of  such  im- 
portance that  it  will  be  necessary  to  refer  to  it 
again;  but  for  the  present  we  must  confine  our- 
selves to  its  bearing  on  the  particular  point  un- 
der discussion.  Did  the  Pullman  Company  on 
this  occasion,  by  virtue  of  its  exceptional  wealth, 
bring  to  bear  on  its  workmen  any  exceptional 
pressure?  Was  it  able  to  force  a  reduction  of 
wages  which  a  less  wealthy  employer  would  have 
been  unable  to  enforce?  Were  its  workmen 
subjected  to  any  limitation  of  freedom  which  a 
feebler  employer  would  have  been  unable  to  bring 
about? 

The  statement  of  these  questions  appears  to 
bear  their  answer  on  its  face.  Had  the  Pullman 
Company  been  less  strong  financially,  it  is  evi- 


54  INIM^IKIAL    FUF-EDOM. 

(lent  (li.it  it  could  not  have  offered  its  men  so 
favourable  terms  as  it  did.  If  it  liad  been  in 
debt,  or  obliged  to  l)orrovv  money  to  carry  on 
its  business,  it  would  not  have  been  a  safe  pol- 
icy to  bid  for  c(jntracts  in  which  there  could  be 
no  profit.  The  pressure  which  it  brought  to  bear 
on  its  workmen  consisted  in  offering  them  the 
option  of  reduced  wages  or  no  work.  A  feebler 
concern  would  have  been  obliged  to  close  its 
works  altogether,  or  to  offer  still  lower  wages. 
It  would  have  been  compelled  to  insist  on  a  re- 
duction which  the  Pullman  Company  was  not 
compelled,  but  only  persuaded,  to  adopt.  The 
freedom  of  its  workmen  would  have  been  affected 
by  this  same  necessity,  and  limited  to  an  even 
greater  extent. 

In  short,  the  severe  conditions  of  business  to 
which  a  wealthy  employer  has  power  to  a  certain 
extent,  and  for  a  short  time,  to  assert  his  superi- 
ority, would  have  dominated  both  the  weaker  em- 
ployer and  his  employees.  Whatever  odium  was 
incurred  by  the  Pullman  Company,  therefore, 
must  have  been  aroused  by  other  causes  than 
any  exceptional  exercise  of  power  in  the  reduc- 
tion of  wages.  The  evidence  indicates  that  the 
company  would  have  suffered  smaller  loss  by  clos- 
ing its  works  altogether  than  by  undertaking  the 
contracts  which  it  ilid;  and  if  this  is  true,  a  less 


SOME    EXCEPTIONS    CONSIDERED.  55 

substantial  concern  would  probably  have  been 
obliged  to  close. 

Still,  it  may  be  urged,  there  are  situations  con- 
ceivable in  which  the  wealthier  employer  can  more 
effectually  coerce  his  workmen.  Business  may  be 
in  such  a  condition  that  a  small  profit  can  be 
made,  although  less  than  an  average  one,  with- 
out any  reduction  of  wages.  In  such  a  case  a 
corporation  of  limited  resources  may  find  it  pru- 
dent to  be  content  with  very  little  profit,  rather 
than  run  the  risk  of  having  to  suspend  its  opera- 
tions on  account  of  a  general  strike.  Its  man- 
agers might  consider  a  reduction  of  wages  justi- 
fiable, and  yet  not  dare  to  insist  on  it.  By  contin- 
uing as  they  are,  they  can  hold  their  own,  perhaps, 
until  better  times,  while  if  they  stopped  work  al- 
together they  might  find  it  impossible  to  remain 
solvent.  On  the  other  hand,  a  corporation  with 
plenty  of  money  at  its  command  could,  under  such 
circumstances,  carry  things  with  a  high  hand. 
The  trifiing  profit  to  be  gained  might  not  be  an  in- 
ducement sufficient  to  influence  the  action  of  its 
managers.  They  are  prepared  to  face  loss,  and 
they  can  say  to  their  employees  that  work  will 
go  on  at  reduced  wages  or  not  at  all. 

While  such  a  situation  is  conceivable,  it  does 
not  often  appear  to  exist.  Nothing  is  more  com- 
mon than  for  wealthy  corporations  to  pass 
5 


throtijjh  pcriorl*^  of  unprofitable  \ms\x\e%*t  without 
i\\s\.Mx\t\r\v,  the  wages  of  their  w<'/rkmcn.  The 
i\\^c.tm\.cwX  aroused  by  reduced  wage*  may  cause 
more  lo»*  than  will  l>c  balanced  by  any  saving 
in  the  wages  account,  and  a»  a  general  rule  men 
in  charge  of  a  bu,%iness  are  very  reluctant  to 
have  it  interrupted-  To  an  extcmt  that  is  ;  ' 
ably  not  generally  realized,  the  success  of  a  ;,-.. 
ness  de|>ends  on  the  success  of  its  managers  in 
securing  customers.  If  the  business  is  suv 
pended,  these  customers  may  be  lost.  The)'  arc 
captured  by  watchful  rivals,  and  they  may  not 
1^  won  back.  As  a  rule,  it  may  l>e  laid  down  that 
it  is  unwise  for  any  large  concern  to  reduce  wages 
unless  the  conditions  are  pretty  imperative. 
Then,  the  workmen  appreciate  the  necessities  of 
the  situation;  but  if  they  believe  that  their  em- 
ployer is  making  customary  profits,  while  mak- 
ing them  accept  lower  wages,  they  are  very- 
apt  to  rebel.  Taking  all  the  conditions  into 
consideration,  we  can  hardly  escape  concluding 
that  corporations  of  exceptional  wealth  are 
not  sinners  above  other  employers  in  limiting 
the  freedom  of  their  workmen.  In  fact,  we 
can  hardly  deny  that,  on  the  whole,  their 
workmen  fare  better  than  those  of  less  opulent 
masters. 

We  have  still  to  examine  the  case  of  corpora- 


SOME    EXCEPTIONS    CONSIDERED.  57 

tions  enjoying  monopolies  of  particular  branches 
of  industry.  The  term  monopoly  is  now  used 
in  a  very  loose  way,  and  probably  means  in  the 
popular  mind  nothing  more  than  the  realization 
of  profits  above  the  average.  This,  of  course, 
implies  that  for  some  reason  free  competition 
does  not  prevail,  but  it  is  not  so  much  the  ab- 
sence of  competition  that  is  regarded  as  the 
existence  of  excessive  profits.  A  corporation, 
therefore,  which  possessed  entire  control  of  a 
certain  industry,  but  made  only  the  ordinary 
rate  of  profit,  would  not  be,  or  possess,  a  mo- 
nopoly, as  now  commonly  understood.  The 
case  before  us,  therefore,  is  reduced  to  the  in- 
quiry whether  corporations  enjoying  excep- 
tional profits  are  able,  by  virtue  of  them,  to 
make  exceptional  exactions  from  their  work- 
men. 

In  this  case,  also,  the  clear  statement  of  the 
question  indicates  what  the  answer  must  be. 
Unless  there  are  exceptional  hindrances  to  the 
free  movement  of  workmen  out  of  the  industry 
carried  on  by  the  monopoly,  it  can  not  be  pos- 
sible to  depress  their  wages  to  any  greater  extent 
than  they  are  elsewhere  depressed.  If  the  gen- 
eral business  of  the  country  is  bad,  monopolies 
can  reduce  wages,  because  their  employees  know 
that  if  they  quit  their  work  it  may  not  be  pos- 


58  INDUSTRIAL    llilAMOM. 

siblc  to  obtain  employment  elscwiiere.  If  busi- 
ness is  improving,  the  manaj^ers  of  the  monop- 
olies know  that  if  they  do  not  raise  waj^es  their 
working  force  will  diminish  at  a  time  when  it  is 
desirable  to  have  it  increase. 

So  far  as  unskilled  labour  is  concerned,  it  is 
evident  that  there  can  be  no  exceptional  hin- 
drances to  its  seeking  the  employer  that  pays 
the  best  wages.  The  case  may  be  otherwise 
with  skilled  labour  in  special  lines  of  industry. 
To  change  his  trade  may  be  a  serious  hardship 
to  a  workman  who  has  attained  great  proficiency 
in  a  certain  department,  and  if  there  is  only  one 
employer  in  that  department,  he  may  appear  to 
be  entirely  dependent  on  that  employer.  But 
we  must  not  disregard  the  fact  that  in  such  cases 
the  employer  is  equally  dependent  on  his  work- 
men. If  he  loses  them  he  can  not  replace  them, 
for  there  are  no  others  possessing  their  peculiar 
qualifications.  Since  we  are  assuming  that  the 
employer  is  making  exceptional  profits,  it  follows 
that  he  is  under  exceptional  inducements  to 
maintain  his  working  force.  The  conclusion 
must  therefore  be  that  monopolies  are  likely  to 
pay  their  skilled  workmen  higher  rates  of  wages 
than  are  current,  rather  than  lower  ones.  As  a 
matter  of  fact,  skilled  workmen  under  such  cir- 
cumstances arc  apt   to  be  strongly  united,  and 


SOME    EXCEPTIONS    CONSIDERED.  59 

to  appreciate  the  advantages  of  their  position. 
They  are  exceptionally  independent,  rather 
than  the  victims  of  oppression,  and  their  condi- 
tion is  very  far  removed  from  that  of  "  industrial 

slavery." 


CHAPTER  VI. 

SOME  ELEMENTARY  TRUTHS  ABOUT 
CORPORATIONS. 

The  arq^umcnts  heretofore  presented  have 
been  of  a  nature  to  prove  that  corporations,  even 
when  exceptionally  rich,  have  no  power,  or,  if 
they  have  the  power,  have  no  sufficient  motive 
to  reduce  wages  below  the  rate  paid  by  individual 
employers.  In  such  a  treatise  as  this  it  is  not 
practicable  to  appeal  to  facts,  except  in  a  very 
general  way;  but  I  do  not  hesitate  to  say  that 
any  one  who  will  observe  what  is  within  his  own 
field  of  knowledge  will  find  abundant  confirma- 
tion of  the  above  reasoning.  The  ordinary  farm 
labourer  receives  wages  varying,  according  to  the 
time  of  year  and  the  necessities  of  his  employer, 
from  mere  board  to  $20  a  month  in  addition  to 
his  keeping.  It  is  doubtful  if  at  the  present 
time  farm  hands  get  through  the  year  the  equiv- 
alent of  $20  a  month  without  board.  Much 
higher  rates  may  prevail  in  some  parts  of  the 

country,  but  they  are  oflfset  by  the  lower  rates 

60 


TRUTHS  ABOUT  CORPORATIONS.       6l 

which  are  all  that  many  farmers  in  the  West  and 
South  can  afford  to  pay.  Very  few  corporations, 
however,  pay  lower  wages  than  these,  and  the 
greater  number  pay  much  more.  Even  the 
Pullman  Company  was  paying  its  men  at  the 
time  of  the  strike  on  the  average  more  than 
$2  a  day,  and  wages  as  low  as  $i,  paid  by  cor- 
porations, are  on  the  whole  exceptional  even  for 
unskilled  labour.  In  the  case  of  railroads,  we 
have  already  seen  that,  at  the  present  time,  many 
of  them  are  paying  higher  wages  than  the  aver- 
age of  private  employers,  and  that  it  is  the  judg- 
ment of  the  United  States  Labour  Commissioner 
that  this  is  and  always  has  been  the  rule.  But 
however  this  may  be,  no  evidence  has  been  made 
public  at  any  time  showing  that  corporations  in 
general,  or  rich  corporations  in  particular,  do,  as 
a  matter  of  fact,  either  systematically  depress  or 
from  time  to  time  reduce  the  wages  of  their  em- 
ployees below  the  rates  paid  by  private  employ- 
ers for  similar  service. 

But  it  is  impossible  to  ignore  the  existence  of 
a  belief  or  conviction  that  corporate  employers, 
especially  if  they  are  rich,  owe  something  more 
than  this  to  their  workmen.  We  shall,  perhaps, 
find  sufficient  reasons  why  this  belief  is  not  very 
clearly  expressed  or  definitely  asserted;  but  it 
unquestionably    prevails.      The    leaders    of    the 


62  INDUSTRIAI.    rRF.F.DOM. 

American  Railway  Union  stated  it  very  frankly 
in  their  testimony  before  the  commission  that 
invcstij^^ated  the  Chicaj^o  strike.  They  thouj^ht 
that  the  Government  ou^ht  to  own  the  railroads, 
"  nu'ctiii^-  deficits  as  they  do  on  mail  routes," 
and  applying  the  vast  sums  now  paid  in  dividends 
to  the  payment  of  such  \vaf:;^cs  and  pensions  that 
"  the  men  would  not  feel  that  they  had  to  resort 
to  extreme  efforts  of  any  kind  to  maintain  a  live- 
lihood." Undoubtedly  men  that  maintain  such 
a  proposition  as  this  consider  that  the  Govern- 
ment is  abundantly  able  to  pay  these  liberal  wages 
and  pensions.  The  Government  is  the  most 
powerful  and  in  a  certain  way  the  richest  cor- 
poration of  all,  and  it  is  not  surprising  that  the 
ordinary  labourer,  observing  the  wages  and  pen- 
sions paid  by  it  to  a  certain  number  of  its  sub- 
jects, should  see  no  reason  why  similar  favour 
should  not  be  extended  to  a  greater  number,  if 
not  to  all. 

Nor  are  such  beliefs  confined  to  labourers. 
The  members  of  the  strike  commission,  in  the 
questions  addressed  by  them  to  the  officers  of 
the  Pullman  Company,  indicated  their  convic- 
tion that  these  officers  ought  to  have  paid  higher 
wages  than  their  competitors,  although  they 
could  get  no  higher  prices  for  their  products. 
The  testimonv  of  these  officers  showed  that  the 


TRUTHS  ABOUT  CORPORATIONS.       63 

company  was  not  only  making  no  profit,  but  was 
actually  losing  money  on  its  contracts;  that  its 
surplus  represented  the  accumulations  of  twenty- 
seven  years,  intended  to  insure  to  its  stockholders 
the  maintenance  of  dividends,  while  the  work- 
men at  Pullman  had  been  in  its  employ  on  the 
average  probably  little  more  than  two  years;  that 
the  earnings  of  the  employees  had  always  been 
at  a  high  rate,  no  material  reduction  having  ever 
taken  place  before,  and  that  this  reduction  was 
followed  by  the  employment  of  three  times  the 
number  of  men  that  had  been  at  work  before  it 
was  made. 

Nevertheless,  the  commissioners  pretty  clear- 
ly intimated  that  the  managers  of  the  corpora- 
tion were  under  a  moral  obligation  to  apply  its 
surplus  to  the  payment  of  higher  wages.  It 
does  not  clearly  appear  that  they  held  that  the 
demand  of  the  strikers  for  the  wages  prevailing 
before  the  panic  should  have  been  complied  with, 
but  they  apparently  regarded  a  reduction  of 
twenty-two  per  cent  as  unfair.  Nor  does  it 
appear  to  me  to  admit  of  doubt  that  the  com- 
missioners represented  a  considerable  public 
opinion.  I  take  no  account  of  the  ravings  of 
newspaper  writers  or  the  frantic  utterances  of 
demagogues.  Disregarding  these,  I  am  satisfied 
that  a  large  number  of  upright  and  benevolent 


64  INDUSTRIAL    I'K  KIIDOM. 

people  sincerely  believe  that  under  such  circum- 
stances as  are  stated  above,  to  reduce  waj^cs  is 
an  act  of  oppression.  This  necessarily  involves 
ihc  piinciplc  that,  as  a  matter  of  justice,  corpora- 
tions should  not  (iiily  i)ay  their  workmen  wiien 
business  is  good  as  high  wages  as  are  paid  by 
other  employers  for  like  service,  but  should  also, 
when  business  is  bad,  pay  them  higher  wages 
than  their  comi)elitors;  or  else  it  involves  the 
principle  that  such  corporations  as  have  an  accu- 
mulated surplus  arc  justly  held  to  this  responsi- 
bility. 

I  have  been  careful  to  use  the  expression,  the 
managers  of  corporations,  in  many  cases  where 
it  would  have  apparently  been  simpler  to  speak 
of  corporations  directly.  However  pedantical 
this  may  have  seemed,  it  has  been  done  from  the 
deliberate  conviction  that  a  great  many  danger- 
ous fallacies  spring  from  the  practice  of  personi- 
fying abstractions.  This  is  especially  true  of  cor- 
porations, and  it  is  particularly  mischievous  in  the 
case  of  the  Government,  which  is  the  largest  cor- 
poration of  all.  Most  of  the  wild  schemes  that 
captivate  the  imagination  and  excite  the  hopes 
of  the  populace  are  unconsciously  based  on  the  as- 
sumption that  the  Government  is  a  semi-omnipo- 
tent being,  having  inexhaustible  stores  of  wealth 
in  its  possession,  which  it  is  able  to  dispense  in 


TRUTHS  ABOUT  CORPORATIONS.       65 

the  shape  of  bounties,  or  pensions,  or  money, 
to  the  inestimable  gain  of  its  subjects.  If  the 
common  people  could  be  made  to  realize  that 
Government  is  merely  a  name  expressing  a  body 
of  relations  under  which  the  actions  of  a  certain 
number  of  human  beings  are  determined,  that  it 
has  no  powers  in  excess  of  the  combined  powers 
of  these  human  beings,  and  no  revenue  except 
what  is  furnished  by  them  out  of  their  earnings, 
a  great  stride  forward  would  be  made.  Hence 
it  is  of  the  utmost  importance,  when  we  are  dis- 
cussing governmental  policy,  to  speak  of  the  wis- 
dom and  justice  not  of  our  Government  but  of 
our  legislators;  to  dwell  not  on  the  wealth  of 
our  Government  but  on  that  of  its  subjects;  and 
to  emphasize  the  truth  that  what  is  called  the 
revenue  of  Government  is  nothing  but  a  part  of 
the  revenue  of  the  individual  men,  women,  and 
children  composing  the  nation  taken  from  them 
in  the  shape  of  taxes. 

For  somewhat  similar  reasons  it  is  eminently 
desirable  to  avoid  personifying  other  corpora- 
tions. No  matter  how  clear-headed  we  may  be, 
it  is  impossible  not  to  be  affected  to  a  certain 
extent  by  the  incessant  attribution  of  the  quali- 
ties of  the  angels  of  darkness  to  these  legal  ab- 
stractions. No  one  will  deny  that  it  is  only  by 
a  figure  of  speech  that  moral  quality  can  be  as- 


CfC>  INOrSTRIAL    KRKKI)f)M. 

sipfiicd  to  an  y  til  ill, 1^^  but  the  acts  of  liunian  beings; 
but  no  one  will  deny  that  it  is  very  difficult  not  to 
be  misled  by  figures  of  si)cech.  We  hear  so  in- 
cessantly of  the  greed,  the  tyraiuiy,  the  rapacity, 
the  unscrupulousncss  of  corporations,  that  we  are 
in  constant  danger  of  forgetting  that  in  reality  no 
such  vices  can  exist,  and  of  insensibly  acquiring 
a  prejudice  against  the  very  name  corporation. 
Sensible  peojile  may  be  able  by  an  effort  of  reason 
to  avoid  most  of  the  worst  results  of  such  falla- 
cies, but  it  is  doubtful  if  they  can  avoid  them 
altogether;  and  it  is  certain  that  many  unreason- 
ing people  are  completely  deceived  by  them, 
and  think  and  talk  as  if  the  country  was  overrun 
and  dominated  by  sw^arms  of  incorporated 
demons.  We  congratulate  ourselves  on  our 
own  enlightenment,  when  we  read  of  the  hosts 
of  ghouls  and  werewolves  and  hobgoblins  and 
witches  and  bogies  with  which,  in  the  middle 
ages,  our  miserable  ancestors  imagined  them- 
selves to  be  encompassed;  but  if  they  were  to 
read  some  of  the  accounts  now  published  of  the 
fiendish  malignity  and  superhuman  ingenuity  of 
our  corporations,  they  might  be  inclined  to  think 
their  plagues  a  lighter  infliction  than  ours. 

In  view  of  the  mischief  likely  to  arise  from 
such  fallacies,  it  is  perhaps  prudent  to  restate 
some  elementary  truths  concerning  corporations. 


TRUTHS  ABOUT  CORPORATIONS.       6/ 

They  are  not  persons,  and  can  have  none  of  the 
attributes  of  persons.  They  can  not  commit 
wrong  or  suffer  wrong.  They  can  be  neither 
benevolent  nor  malevolent.  They  can  not  be 
seen  or  touched.  They  have  no  souls  nor  any 
life.  When  we  speak  of  a  corporation,  we  mean 
generally  that  a  certain  number  of  people  have 
agreed  to  put  some  of  their  property  in  charge 
of  certain  agents,  for  a  definite  period,  and  for 
special  purposes.  The  owners  of  the  property 
part  with  their  control  over  it,  and  in  considera- 
tion of  this  are  exempted  from  liability  for  the 
acts  of  their  agents,  except  to  the  amount  of 
the  property  committed  to  their  charge.  When 
we  speak  of  the  acts  of  corporations,  therefore, 
we  mean,  and  can  only  mean,  the  acts  of  the 
stockholders  or  their  agents.  When  we  speak  of 
the  greed,  or  the  oppression,  or  the  malice  of  a 
corporation,  we  mean,  and  must  mean,  that  some 
or  all  of  the  stockholders,  or  trustees,  or  offi- 
cers, or  agents  of  the  corporation  are  guilty  of 
these  abominations.  When  we  speak  of  its 
crimes,  we  mean  crimes  committed  by  some  of 
these  individuals.  When  we  speak  of  imposing 
fines,  burdens,  taxes,  or  other  charges  on  cor- 
porations, we  mean  that  they  are  to  be  paid  out 
of  the  property  of  certain  individual  human  be- 
ings.    And  when  we  speak  of  the  resources  of 


68  INDUSTRr,\I.    I  UK  I.I)  oM. 

a  CDipntation,  \vc  incrui  a  certain  quantity  of 
wealth  that  bclonj^s  in  definite  proportions  to 
a  certain  nutnhcr  of  human  heinj^s  called  its 
stockholders. 

Let  us  therefore  inf|uire  whether  the  men 
who  manage  corj)orate  enterprises,  or  those  who 
own  corporate  property,  arc  under  any  greater 
moral  obligation  than  private  employers  to  pay 
their  workmen  higher  wages  in  bad  times  than 
those  currently  j)aid  for  similar  service.  It  is  to 
be  observed,  in  the  first  place,  that  the  managers 
of  business  corporations  are  restrained  by  law 
from  applying  the  funds  under  their  control  to 
benevolent  purposes.  They  are  liable  as  trustees 
for  the  stockholders,  and  confined  by  the  cor- 
porate charters  to  certain  definite  business  op- 
erations. There  is,  no  doubt,  some  elasticity  in 
these  restrictions.  The  law  will  not  compel  the 
manager  of  a  corporation  to  reduce  wages  to 
the  lowest  possible  figure  at  which  he  can  obtain 
workmen,  provided  he  can  reasonably  claim  that 
in  the  long  run  such  a  policy  would  be  injurious 
to  the  property  under  his  charge.  On  the  other 
hand,  it  will  not  sanction  his  application  of  sur- 
plus capital  to  the  payment  of  unnecessarily  high 
wages  on  grounds  of  humanitarian  sentiment. 
In  neither  direction  can  he  go  so  far  as  the  pri- 
vate employer,  for  the  latter  is  dealing  with  his 


TRUTHS  ABOUT  CORPORATIONS.        69 

own  property,  and  is  responsible  only  to  him- 
self. Nor  would  it  be  safe  for  the  law  to  lay  down 
any  other  rule.  Trustees  are  too  prone  to  treat 
the  funds  under  their  control  as  if  they  owned 
them,  and  if  the  law  is  to  be  modified,  it  should 
be  in  the  direction  of  more  rather  than  less  rigid 
accountability. 

In  the  second  place,  justice  does  not  seem  to 
require  that  stockholders  in  corporations  should 
pay  higher  wages  to  their  workmen  than  other 
employers.  Corporations  not  possessed  of  ex- 
ceptional advantages  have  no  power  to  pay  ex- 
ceptionally high  wages,  and  where  the  power 
does  not  exist  there  can  be  no  moral  obligation. 
Such  a  requirement  would  imply  the  existence 
of  a  responsibility  for  employing  property  in  cor- 
porate enterprises  which  does  not  attach  to  its 
other  uses.  Were  it  true  that  the  existence  of 
corporations  was  an  evil  in  itself,  and  that  there 
was  something  culpable  in  investment  in  them,  it 
might  be  proper — if  it  could  be  proved  practica- 
ble— to  enact  such  laws  as  would  make  the  re- 
turn on  capital  so  invested  smaller  than  on  that 
under  private  management.  Perhaps  no  one  is 
prepared  to  maintain  the  truth  of  this  proposi- 
tion; yet,  since  much  denunciation  of  corpora- 
tions is  unjust  unless  it  be  established,  it  seems 
necessary  to  examine  it. 


70  INDI    .-.  I  KIAI.     !•  Rl   I   l)()M. 

Tt  cm  not  be  (Ic-iucd  that  witli<jut  the  aid  of 
the  coiixjialc  form  of  doin^  business,  a  vast 
amount  of  wealth  that  is  now  productive  would 
he  wasted;  many  fields  of  industry  would  have 
In  he  abandoned,  and  many  labourers  deprived  of 
employment.  I'y  means  of  corporations  an  in- 
iinile  number  of  small  sums,  of  which  the  owners 
can  make  no  profitable  use,  are  united  into  large 
funds,  which  bear  fruit  in  b(;lh  j^rofits  and  wages. 
It  is,  of  course,  possible  for  business  to  go  on 
^vhere  there  are  no  corporations,  but  it  must  be 
on  a  restricted  scale.  The  vast  operations  of 
modern  industry  arc  only  possible  by  means  of 
our  credit  system.  Borrowed  capital,  and  enor- 
mous quantities  of  it,  are  as  necessary  to  the  con- 
duct of  the  business  of  the  present  day  as  coal  is 
to  the  production  of  steam  or  iron  to  the  opera- 
tion of  railroads.  As  Mr.  Bagehot  points  out, 
the  English  did  not  look  with  favour  on  the  con- 
struction of  the  Suez  Canal.  So  acute  an  ob- 
server as  De  Tocc|ueville  thought  that  it  would 
bring  back  the  Eastern  trade  to  the  Mediter- 
ranean and  revive  Genoa  anil  \'enice,  and  the 
English  generally  agreed  with  him.  But  when 
the  canal  was  made,  it  was  found  that  it  could 
be  profitably  used  only  by  large  vessels,  and  that 
the  great  supplies  of  loanable  capital  necessary 
to  send  forth  a  tlcet  of  these  vessels  were  to  be 


TRUTHS  ABOUT  CORPORATIONS.       /I 

found  only  in  England.  No  one  will  question  the 
fact  that  the  railroads  of  the  United  States  have 
added  almost  fabulous  amounts  to  the  national 
wealth.  Without  them,  regions  now  crowded 
with  towns  and  cities  would  still  be  the  hunting 
grounds  of  Indians,  and  the  white  population 
would  be  confined  to  the  neighbourhood  of  the 
ocean  and  the  waterways.  These  great  railroads, 
however,  could  never  have  been  built  without  the 
use  of  borrowed  capital;  and  without  the  aid 
of  corporations  this  capital  could  neither  have 
been  made  available  in  the  first  place,  nor  utilized 
after  it  had  been  made  available. 

This  will  be  evident  if  we  consider  what 
agencies  are  necessary  for  the  collection  and  ap- 
plication of  capital,  if  it  is  to  be  used  on  the 
present  scale.  Loanable  capital  consists  of  the 
savings  of  those  who  are  not  in  position  to  use 
their  savings  in  business.  Most  wage-earners 
and  salaried  persons  are — ex  vi  termini — not  in 
business  for  themselves;  hence  they  must  lend 
their  savings  either  to  individuals,  or  to  partner- 
ships, or  to  corporations.  To  lend  to  an  indi- 
vidual, however,  unless  with  the  collateral  secu- 
rity of  a  mortgage  of  his  property — a  protection 
not  available  for  small  sums  and  short  terms — is 
for  most  people  a  difficult  and  perilous  transac- 
tion.    One  man  may  with  good  reason  have  con- 


72  INDUSTRIAL    rUKKUOM. 

fulciicc  in  another;  hiil  it  is  scKlom  possible  for 
a  minihcr  of  i)crs<)ns  to  have  the  same  rational 
L^roinuls  of  confidence  in  the  same  individual. 
\(ir  can  an  inchvichial  ad\anta}^eously  supply 
liiinsclf  with  wliat  caj)ital  he  needs  by  borrowing 
small  sums  from  a  multitude  of  lenders,  unless, 
indeed,  he  is  a  banker  by  profession.  There 
arc.  it  is  true,  many  individual  bankers,  but  their 
number  has  decreased,  for  the  simple  reason  that 
banking — that  is,  borrowing  and  lending  other 
pco(>le's  capital — is  a  business  refjuiring  per- 
manency in  its  conditions.  The  individual  man, 
however,  is  subject  to  the  infirmities  of  disease, 
old  age,  and  death.  Those  who  have  lent  him 
money,  therefore,  may  find  themselves  embar- 
rassed by  contingencies  of  very  frequent  occur- 
rence, and  they  will  secure  themselves  against 
such  embarrassments  if  any  practicable  method 
is  offered. 

There  have  been  many  partnerships  engaged 
in  banking,  and  formerly  on  a  very  great  scale. 
By  virtue  of  numbers,  their  business  is  placed 
on  a  permanent  basis;  but  they  sufTer  from 
another  difficulty.  Under  the  law  of  partner- 
ship, one  member  may  not  only  make  away  with 
all  the  partnership  property,  but  also  exhaust  the 
private  fortunes  of  all  the  members  in  payment 
of  its  debts.     To  lend  one's  moncv  to  a  firm  of 


TRUTHS  ABOUT  CORPORATIONS.       73 

bankers,  therefore,  implies  confidence  in  the  in- 
tegrity of  all  the  members  of  the  firm — a  confi- 
dence for  which  ordinary  people  can  seldom  offer 
any  rational  justification.  On  the  other  hand, 
the  fact  that  every  partner  is  the  unlimited  agent 
of  all  the  others  in  matters  not  plainly  foreign 
to  the  partnership  business,  makes  a  great  many 
people  extremely  reluctant  to  go  into  partner- 
ship. It  is  a  great  deal  easier  to  get  into  this 
relation  than  it  is  to  get  out  of  it,  and  when 
men  have  acquired  great  wealth,  they  are  often 
unwilHng  to  risk  even  a  remote  possibility  of  hav- 
ing it  all  swept  away.  Hence,  old  banking  firms 
have  in  modern  times  often  become  incorporated, 
and  not  many  new  ones  have  arisen  to  take  their 
place. 

Corporations  doing  a  banking  business  are 
not  only  more  permanent  but  also  safer  reposi- 
tories of  savings  than  individuals  or  partnerships. 
A  partnership  may  be  utterly  ruined  by  the  folly 
of  one  of  its  members,  but  the  corporation  is 
limited  by  law,  nowadays  at  least,  to  such  an  ex- 
tent that  folly  must  be  supplemented  by  fraud 
in  order  to  dissipate  its  assets.  Many  deplorable 
instances  of  this  pernicious  combination  have 
taken  place,  but  if  we  take  into  view  the  great 
number  of  these  financial  institutions,  the  per- 
centage of  loss  from  both  errors  of  judgment  and 


74  INUrSTRIAI.    FKKKDOM. 

positive  defalcation  is  comparatively  small.  Al- 
tliou^h  not  commonly  spoken  of  as  hanks,  insur- 
ance companies  of  various  kinds  really  carry  on  the 
bankinjj^  business,  and  we  can  hardly  conceive  the 
possibility  of  their  functions  being  discharged  by 
individuals  or  partnerships.  It  is  certainly  not 
too  much  to  say  that  without  the  aid  of  savings 
banks,  insurance  companies,  and  corj)orations  of 
similar  character,  vast  amounts  of  capital  that 
arc  now  collected  and  made  available  by  union 
would  not  only  not  be  collected,  but  would  never 
be  saved  at  all.  For  without  opportunities  for 
deposit,  savings  become  nothing  but  hoardings, 
and  the  legitimate  desire  to  contribute  to  and  to 
participate  in  the  prosperity  of  the  country  degen- 
erates into  mere  anxiety  for  personal  security. 

As  corporations  have  become  indispensable 
means  of  collecting  savings,  so  they  are  equally 
necessary  for  their  utilization.  It  can  seldom  be 
the  case  that  an  individual  or  even  a  partnership 
can  create  a  railroad  or  carry  on  any  enterprise 
on  a  similar  scale.  The  embarrassments  already 
referred  to  would  make  it  difficult  to  borrow  capi- 
tal, and  would  make  it  especially  difficult  to  pro- 
cure the  participation  of  those  who  now  take 
shares  of  stock.  Very  few  people  would  be  will- 
ing to  take  an  interest  in  a  railroad,  or  in  a  large 
manufacturing   concern,    if   they   would    thereby 


TRUTHS  ABOUT  CORPORATIONS.       75 

make  -themselves  liable  to  the  extent  of  their 
whole  property  for  its  debts.  These  enterprises 
require  such  masses  of  capital  as  only  the  multi- 
tude possesses,  but  if  the  multitude  were  legally 
in  partnership  the  situation  would  be  utterly  in- 
tolerable. If  one  partner  became  insolvent,  his 
interest  in  the  partnership  might  be  attached,  and 
if  he  died  or  retired  it  would  have  to  be  adjusted. 
Complications  would  arise  if  he  wished  to  sell 
or  mortgage  It;  in  short,  the  difficulties  that 
would  be  encountered  would  be  innumerable. 
To  sum  the  whole  matter  up,  by  means  of  cor- 
porations countless  numbers  of  people  are  able 
to  invest  portions  of  their  savings  in  all  sorts  of 
enterprises  with  the  assurance  that  at  the  very 
worst  their  whole  property  can  not  be  lost,  but 
only  those  parts  of  it  severally  invested  in  these 
enterprises.  In  other  words,  they  can  make  use 
of  the  economic  advantages  of  partnership,  or  co- 
operation, without  subjecting  themselves  to  the 
abnormal  perils  with  which  the  application  of  the 
primitive  rules  of  the  common  law  to  modern 
afifairs  has  surrounded  this  form  of  enterprise. 

We  have  dwelt  on  the  part  played  by  corpora- 
tions in  collecting  and  applying  loanable  capital, 
but  it  is  evident  from  what  has  just  been  said 
that  they  enable  those  who  make  savings  to 
derive  profits  from  them  as  well  as  interest.     Men 


y6  INDUSTKIAf.    FRI.KDOM. 

will  lend  on  collateral  security  to  individuals  and 
partnerships,  but  tliey  will  not  put  their  money 
into  the  business  of  an  individual  or  a  partner- 
ship. Thus,  while  the  aniovnit  of  loanable  capi- 
tal crcatr(l  would  be  nnuh  smaller  if  there  were 
no  ct)rporations,  the  amount  of  capital  invested 
without  collateral  security  would  also  be  dimin- 
ished. It  is  highly  unreasonable  to  suppose  that 
new  enterprises  would  be  undertaken  on  anything 
like  the  present  scale  were  capitalists  precluded 
from  availing  themselves  of  the  corporate  form 
of  investment.  The  self-interest  of  individuals 
becomes  an  indispensable  condition  of  the 
progress  of  the  community.  Every  new  ven- 
ture is  necessarily  attended  with  some  risk  of 
failure,  and  profits  commensurate  with  the  risk 
must  be  anticipated,  or  capitalists  will  have  noth- 
ing to  do  with  it.  But  these  new  ventures  have 
beyond  c|ucstion  enormously  increased  wealth, 
and  with  it  the  recompense  of  labourers.  Hence 
it  is  a  distinctly  injurious  policy  to  say  to  those 
who  have  small  savings  to  invest,  that  if  they 
invest  them  in  a  corporation  they  shall  be  fined 
for  it.  The  result  must  be  not  only  a  diminution 
of  the  amount  of  capital  seeking  such  invest- 
ment, but  also  the  surrender  of  the  field  to  the 
most  unscrupulous  members  of  the  investing  or 
exploiting  class.      There  are  objections  to  the 


TRUTHS    ABOUT    CORPORATIONS.  'J^ 

policy  sometimes  adopted  in  certain  communities 
of  paying  a  bounty  in  the  shape  of  exemption 
from  taxes  to  manufacturing  corporations  oper- 
ating within  their  hmits,  but  this  policy  is  more 
enlightened  than  that  of  positive  discourage- 
ment. 

It  is  sometimes  claimed  that  a  great  boon  is 
granted  to  capitalists  in  allowing  them  to  form 
corporations,  and  that  the  community  ought  to 
be  paid  for  its  liberality.  This  seems  to  be  a 
survival  of  the  mediaeval  idea  that  all  trade  ex- 
ists only  by  the  grace  of  the  sovereign,  and  that 
manufacturers  and  merchants  ought  not  to  be 
allowed  to  carry  on  their  pursuits  without  special 
permission.  But  unless  those  who  raise  this  ob- 
jection are  prepared  to  maintain  that  the  exist- 
ence of  corporations  is,  on  the  whole,  injurious 
to  the  community,  instead  of  distinctly  beneficial, 
they  do  not  deserve  much  attention.  Doubtless 
it  is  a  great  convenience  to  capitalists  to  obtain 
the  permanency  of  corporate  existence,  and  to 
avoid  having  the  business  in  which  they  are  en- 
gaged broken  up  whenever  one  of  their  number 
dies  or  becomes  insolvent;  but  unless  the  pub- 
lic can  show  that  it  is  the  gainer  by  maintaining 
inconveniences  and  hindrances  in  general,  it  need 
not  arrogate  any  special  virtue  to  itself  for  per- 
mitting their  removal.     The  same  is  true  of  the 


78  INDUSTRIAL    FRF.P.nOM. 

limitation  of  stockholders*  liability  for  corporate 
debts.  It  is  not  a  question  of  havinj^  our  mod- 
ern business  carried  on  by  companies  of  unlim- 
ited ratlier  than  limited  liability;  it  is  a  question 
of  liavinj^  it  carried  on  at  all.  If  men  can  be 
relieved  from  unlimited  liability,  they  will  exploit 
every  industry  that  offers  a  possibility  of  profit. 
If  they  can  not  be  so  relieved,  most  of  them  will 
have  nothing  to  do  with  undertakings  where  the 
penalty  of  failure  is  so  terrible.  Creditors  are  no 
sufTerers  from  the  limitation  of  stockholders'  lia- 
bility for  corporate  debts.  Probably  more  cred- 
itors lose  money  by  the  failure  of  individuals  and 
partnerships  than  of  corporations,  and,  except  in 
the  case  of  firms  of  well-known  wealth,  lenders 
do  not  count  much  on  the  private  fortunes  of 
partners  as  security.  For  a  number  of  reasons 
the  financial  condition  of  a  corporation  is  much 
more  open  to  discovery  than  that  of  the  mem- 
bers of  a  firm.  The  latter  are  frequently  found 
to  have  lost  their  property  before  their  reputa- 
tion for  wealth  was  afTected;  but  it  is  far  more 
difficult  for  a  corporation  to  conceal  its  condition 
from  those  of  whom  it  desires  to  borrow.  Even 
if  the  limitation  of  liability  were  attended  with 
more  injury  to  creditors  than  is  found  to  be  the 
case,  this  injury  would  l)e  far  outweighed  by  the 
gain    to    stockholders    and    to    the    community 


TRUTHS  ABOUT  CORPORATIONS.       79 

through  the  enlarged  opportunities  for  business 
created  by  this  exemption. 

It  follows,  therefore,  that  the  demand  of  the 
public  for  greater  benevolence  on  the  part  of 
stockholders  in  corporations  than  on  the  part  of 
individual  employers  of  labour  is  not  justified  by 
anything  in  the  nature  of  the  functions  of  cor- 
porations. Stockholders  may  reasonably  claim 
to  make  the  same  profit  on  their  capital  that  is 
made  by  individuals  or  partnerships,  and  if  they 
are  called  upon  to  pay  labourers  at  higher  rates 
than  other  employers,  the  formation  of  corpora- 
tions will  be  discouraged.  By  insisting  on  the 
moral  obligation  of  all  stockholders  to  pay  these 
higher  wages,  the  community  might  thus  bring 
about  a  positive  reduction  of  wages  in  general; 
for  if  the  business  of  a  corporation  fails  to  be 
profitable,  the  stockholders  will  certainly  termi- 
nate it.  The  funds  which  would  have  produced 
a  perennial  supply  of  wages  will  thus  produce  no 
wages  at  all,  and  the  attempt  to  maintain  ab- 
normal wages  on  moral  grounds  will  result  in  low- 
ering them  below  the  normal  figure.  In  short, 
to  hinder  the  establishment  of  corporations  is 
to  obstruct  the  investment  of  capital;  and  to 
obstruct  the  investment  of  capital  is  to  dimin- 
ish the  employment  and  the  wages  of  labourers. 

These  conclusions  may  seem  to  require  some 


80  INDISIKIAI.    IRKKDOM. 

iiuxlifK-ation  in  the  case  (tf  a  corporation  tliat 
lias  accuiuulatc'd  a  surplus.  'I'lic  stockholders  of 
such  a  corporation,  it  may  he  th(ni^lit,  can  af- 
ford to  make  some  contrihiiti(jn  out  of  their  ex- 
ceptional profits  to  the  i)aymcnt  of  exceptional 
wages  to  their  employees.  This  opinion,  how- 
ever, is  based  on  a  misapprehension  of  the  nature 
of  a  surplus,  and  on  a  confusion  of  the  wealth 
of  a  corporation  with  the  wealth  of  its  stockhold- 
ers. C'oncernint^  surjjlus  cai)ital,  it  is  to  be  re- 
marked that,  as  a  rule,  the  constitution  and  the 
policy  of  corporations  contemplate  permanency. 
Their  promoters  enj^age  in  a  business  with  the 
expectation  that  the  business  will  continue  in- 
definitely, and  they  are  generally  compelled  to 
convert  a  large  part  of  their  stock  into  fixed  capi- 
tal. If  the  managers  are  competent,  they  are 
well  aware  that  great  fluctuations  in  prices  and 
in  the  volume  of  trade  have  occurred  and  will 
occur.  It  becomes  of  the  first  importance,  there- 
fore, to  accumulate  a  surplus.  If  profits  are  only 
normal  when  general  trade  is  good,  it  is  highly 
probable  that  in  bad  times  they  will  altogether 
disappear.  If  they  are  large,  it  still  remains  prob- 
able that  they  may  be  greatly  cut  down.  Pru- 
dent managers,  therefore,  bend  all  their  efforts 
to  put  aside  a  surplus,  or  insurance  fund.  Such 
a  fund  will  enable  tb.em  to  meet  their  obligations 


TRUTHS    ABOUT    CORPORATIONS.  8 1 

easily  in  times  of  disaster,  and  to  pay  some  divi- 
dend at  least  to  the  stockholders;  and  it  will 
also  enable  them  to  maintain  the  wages  of  their 
employees  at  a  figure  somewhat  above  that  which 
is  current — a  result  obviously  advantageous  to 
the  men,  if  not  to  the  masters. 

It  seems  to  be  altogether  justifiable,  there- 
fore, when  a  corporation  is  making  abnormally 
large  profits,  for  the  managers  not  to  increase 
wages  to  a  corresponding  extent.  If  they  are 
wise,  they  do  not  increase  their  dividends  corre- 
spondingly, and  they  can  not  wisely  do  so  with 
wages.  Should  they  do  so,  they  would  very 
likely  be  unable,  in  periods  of  distress,  to  main- 
tain wages  even  at  a  low  rate,  and  they  might 
have  to  close  their  works  altogether.  In  theory, 
it  might  be  more  desirable  for  workmen  to  exer- 
cise this  foresight  for  themselves,  and  insure 
against  loss  of  wages  by  saving  from  them  when 
they  were  abnormally  high.  In  practice,  this  is 
done  by  prudent  workmen;  but  there  are  ad- 
vantages, even  in  theory,  in  the  other  plan.  At 
all  events,  it  is  an  established  custom,  for  it  does 
not  admit  of  question  that  the  country  is  full  of 
corporations,  many  of  them  large,  that  have  for 
years,  whether  they  were  making  or  losing 
money,  kept  the  main  body  of  their  workmen 
steadily  employed.      Doubtless  many  managers 


82  INDUSTRIAL    FKKI-.I)r)M. 

pursue  a  difftTcnt  course,  from  j)olicy  or  from  ne- 
cessity;  l)Ut  their  maiiaj^'cmcnt  is  pcrliaps  not,  in 
the  lonj;  run,  so  successful,  nor  is  it  proper  to 
blame  lar^e  corporations  as  a  class  for  the  acts  of 
certain  of  their  aj^^cnts. 

As  to  the  second  error  above  referred  to,  it 
is  evident  that  the  connection  between  the  wealth 
of  a  corporation  and  that  of  its  stockholders  may 
be  extremely  slight.  Most  investors  are  careful 
to  regard  the  maxim  not  to  put  all  their  eggs 
in  one  basket.  Neglect  of  it  soon  teaches  them 
its  value.  In  periods  of  business  depression 
nearly  every  one  fmds  that  some  of  his  invest- 
ments turn  out  badly.  In  some  cases  he  loses 
all  that  he  has  invested;  in  others  he  loses 
all  return  from  it  for  a  period;  in  still  others 
the  rate  of  dividend  is  reduced,  and  in  some  it  is 
maintained.  By  means  of  these  latter  wise  or 
fortunate  investments  he  is  able  to  make  shift 
until  the  times  improve.  But  if  the  corpora- 
tions that  have  accumulated  a  surplus  for  the 
purpose  of  keeping  up  the  payment  of  dividends 
when  they  are  not  earned  are  to  devote  this  sur- 
plus to  paying  higher  wages  than  are  earned, 
their  stockholders  may  be  brought  to  great  dis- 
tress. The  Pullman  Company,  for  example,  had 
some  4.200  stockholders.  Doubtless  many  of 
them  were  to  a  great  extent  dependent  on  their 


TRUTHS  ABOUT  CORPORATIONS.       83 

dividends  from  this  company,  and  relied  upon 
the  surplus  as  insuring  their  continuance.  Many 
of  them  probably  were  women,  and  unable  to 
support  themselves.  There  is  nothing  unrea- 
sonable in  the  supposition  that  most  of  them 
suffered  a  material  diminution  of  their  income 
from  other  sources.  Perhaps  Mr.  Pullman  had 
himself  made  some  investments  that  were 
disastrous.  Some  of  these  stockholders  may 
even  have  found  that  all  their  dividends  ex- 
cept those  from  the  Pullman  Company  were 
cut  ofif. 

Under  such  circumstances,  which  are  proba- 
bly the  actual  circumstances,  it  seems  difficult  to 
maintain  that  these  stockholders,  as  a  class,  were 
under  any  moral  obligation  to  relinquish  their 
dividends  in  order  to  continue  the  payment  of 
wages  at  the  rates  prevalent  in  prosperous  times. 
No  doubt  some  of  them  were  abundantly  able  to 
forego  their  dividends  for  this  purpose;  but  it  is 
equally  certain  that  some  of  them  were  altogether 
unable  to  make  such  a  sacrifice.  But  if  there 
was  any  moral  obligation  in  the  matter,  it  must 
have  been  an  obligation  of  all  the  stockholders, 
and  not  of  a  part.  It  would  be  a  duty  of  the 
stockholders  as  such,  and  not  as  individuals.  The 
wealthy  stockholders  may  or  may  not  have  been 
benevolent  as  individuals,  but  that  is  irrelevant 


84  INDUSTRIAL    rKICKDOM. 

to  this  discussion.  What  they  (Hd  with  their 
(livi(lcti<ls  after  tliey  j^'ot  them  we  need  not  in- 
quire; hut  it  is  ohviously  idle  to  assert  that 
the  rich  stockholders  of  the  I'ullnian  Company 
ouj^ht  to  have  received  a  lower  rate  oi  dividend 
than  the  i)oor  ones.  'ihe  discrimination  *re- 
(juired  for  the  application  of  sucii  a  rule  would 
be  altogether  too  severe  a  task  for  human  in- 
telligence. 

It  is  important  to  add  that  the  securities  of 
corporations  are  to  an  enormous  extent  held  by 
insurance  companies  and  savings  banks,  and  that 
probably  most  of  the  dcj^osits  in  these  institu- 
tions are  the  property  of  working  people.  There 
is  nothing  improbable  in  the  supposition  that 
some  of  the  stock  in  the  Pullman  Company  was 
held  by  savings  banks  as  a  means  of  investing 
these  deposits.  Many  savings  banks  have  made 
much  worse  investments.  If  we  recognise  a 
moral  obligation  on  the  part  of  the  Pullman 
stockholders  to  apply  their  surplus  in  hard  times 
to  the  payment  of  abnormally  high  wages  to  their 
workmen,  it  follows  that  depositors  in  savings 
banks  holding  this  stock  are  afTected  with  this 
obligation.  Hence  we  reach  the  conclusion  that 
such  of  those  depositors  as  are  working  people, 
earning  perhaps  less  than   the  ordinary  rate  of 


TRUTHS  ABOUT  CORPORATIONS.        85 

wages,  are  morally  bound  to  relinquish  some  of 
their  gains  for  the  purpose  of  paying  other  work- 
ing people  more  than  the  ordinary  rate  of  wages. 
Such  a  conclusion,  however,  can  hardly  claim  to 
appeal  forcibly  to  the  conscience. 

The  supposition  which  we  have  just  consid- 
ered is  not  to  be  rejected  as  speculative.  It  is 
well  known  that  fiduciary  institutions  prefer  as 
investments  the  securities  of  corporations  that 
maintain  a  surplus.  They  justly  regard  it  as  of 
the  greatest  importance  to  invest  their  depos- 
itors' money  in  such  a  way  as  to  make  it  bring 
in  a  regular  return.  If  they  understand  that 
strong  corporations  are  to  recognise  such  a  moral 
obligation  as  we  are  considering,  they  will  ex- 
perience the  greatest  perplexity.  They  will  ap- 
prehend that  the  market  value  of  the  securities 
of  such  corporations  must  fluctuate  violently  ac- 
cording to  the  condition  of  business,  and  that  no 
certain  return  can  be  expected  from  them.  Un- 
der such  circumstances  the  rate  of  interest  paid 
to  depositors  would  become  variable,  and  their 
confidence  in  the  safety  of  their  deposits  would 
be  justly  shaken.  It  can  hardly  be  necessary  to 
enlarge  upon  this  further;  and  when  we  consider 
the  vast  investments  of  the  insurance  companies, 
the  trust  companies,  hospitals,  libraries,  colleges, 
churches,  the  trustees  of  estates,  etc.,  we  may 


86  INDUSTKIAI.    1  KKKHOM, 

well  hesitate  to  admit  the  existence  of  a  moral 
olilij^^'ition  which  would  dcinoralize  all  fiduciary 
rt-lalinns,  and  introduce  uncertainty  and  specula- 
tion into  those  departments  of  business  from 
which  it  is  the  j^dory  oi  our  civilization  to  have 
larj^ady  expelled   them. 

In  truth,  the  "  solidarity  "  of  our  economic 
world  is  far  more  complete  than  we  are  apt  to 
suppose.  Machiavelli  warns  us  that  no  one  who 
begins  an  innovation  in  a  state  need  expect  to 
stop  it  at  his  pleasure  or  regulate  it  according 
to  his  intention.  We  can  not  insist  upon  the  as- 
sumption of  new  responsibilities  in  a  particular 
case  without  invoking  principles  the  application 
of  which  may  produce  the  most  mischievous  con- 
fusion. The  present  condition  of  society  is  the 
result  of  innumerable  causes,  acting  and  react- 
ing with  such  complexity  as  to  baffle  all  our  at- 
tempts to  analyze  their  particular  influences.  In 
the  industrial  world  the  part  played  by  corpora- 
tions has  gradually  become  a  very  great  one,  and 
its  magnitude  is  appalling  to  many  minds.  The 
direst  possibilities  are  foreseen,  and  hasty  and 
ill-considered  preventives  are  grasped  at.  But 
enough  has  been  said  to  indicate  that  the  gain 
from  the  introduction  of  the  corporate  form  of 
industry  has  been  very  real,  while  the  evil  re- 
sulting from  it  has  been  largely  imaginary.     To 


TRUTHS  ABOUT  CORPORATIONS.        8/ 

proscribe  or  discourage  it,  and  to  attribute  moral 
delinquency  to  those  who  engage  in  it,  are  very 
revolutionary  proceedings,  the  effect  of  which  on 
the  whole  community  can  not  but  be  extremely 
grave. 


CllAITI'R   \'fl. 

PERSONAL    RKLATIONS    IN    COklMjUATK    INDUSTRY, 

A  CKRTAiM  despotic  brutality  is  commonly 
believed  to  characterize  the  dealings  of  corpora- 
tions with  their  employees.  As  we  have  seen, 
De  Toc(iueville  spoke  with  much  seriousness  of 
the  prospective  harshness  of  modern  industrial 
relations.  We  know  that  men  are  always  prone 
to  abuse  power,  and  there  is  no  reason  why 
ai^cnts  of  corporations  should  be  free  from  this 
temptation.  Probably  no  corporation  has  ever 
been  more  violently  accused  in  this  regard  than 
the  Pullman  Company,  and  in  its  case  we  are 
fortunately  in  possession  of  the  evidence  for  and 
against  the  charges,  which  we  shall  presently  con- 
sider. Apart  from  this  case,  evidence  is  obtain- 
able with  great  difficulty.  Newspaper  reports 
are  inaccurate  and  mendacious,  as  well  as  charac- 
terized by  ignorance  of  the  worthlessness  of  hear- 
say testimony.  Assuming,  however,  that  pe- 
culiarly harsh  personal  relations  between  mas- 
ters and  workmen  result  from  the  existence  of 

83 


RELATIONS  IN  CORPORATE  INDUSTRY.    89 

industrial  corporations,  there  is  certainly  some 
ground  for  contending  that  their  existence  is  not 
an  unmixed  blessing.  Those  who  choose  to  em- 
ploy their  wealth  in  this  way  may  thus  incur  some 
obligation  to  mollify  the  severity  of  present  con- 
ditions by  the  sacrifice  of  a  portion  of  their  gains. 
In  other  words,  the  mere  establishment  of  the 
relation  of  master  and  servant,  when  the  master 
is  a  purely  legal  entity  representing  the  action 
of  a  number  of  masters  by  means  of  hired  agents, 
although  in  some  respects  a  public  advantage, 
may  be  in  others  a  public  nuisance. 

The  substitution  of  the  agent,  or  superin- 
tendent, for  the  true  owner  in  the  case  of  cor- 
porate industries,  may  be  compared  with  the 
substitution  of  the  overseer,  or  slave  driver,  for 
the  master  of  the  slave.  The  capitalist  may  be 
a  humane  person,  incapable  of  oppressing  those 
who  directly  work  for  him;  but  when  he  in- 
trusts his  wealth  to  the  hands  of  a  paid  agent, 
he  becomes  concerned  only  in  the  pecuniary  re- 
sults, and  ceases  to  observe  or  be  interested  in 
the  condition  of  those  whom  this  agent  em- 
ploys. The  reader  of  these  words  may  be  in 
the  receipt  of  income  from  many  different  cor- 
porations; but  it  is  a  chance  if  he  be  acquainted 
with  even  so  much  as  the  name  of  a  single  one 
of  their  employees.     No  matter  how  kindly  his 


90  INDISTRIAL    FKKEUOM. 

tlisi)Osition,  it  is  inij>raclicablc  for  him  to  display 
it,  and  he  must  j,^cncrally  content  himself  with 
the  lujpe  that  the  corporations  in  which  he  is 
interested  are  managed  by  just  and  humane  of- 
ficers. 

It  admits  of  no  question  that  the  dealings 
of  a  corporation  with  its  employees  are  character- 
ized by  greater  rigidity  than  the  dealings  of  in- 
dividual masters  with  their  servants.  This  is  a 
necessary  consequence  of  the  larger  scale  on 
which  the  business  of  corporations  is  conducted. 
The  individual  who  employs  two  or  three  men 
can  control  them  by  his  personal  influence,  and 
does  not  need  to  lay  down  a  body  of  rules  for 
their  observance.  But  when  a  large  number  of 
men  arc  employed  the  conditions  are  very  ditTer- 
ent.  Punctuality  then  becomes  essential.  If 
some  of  the  men  are  late  in  coming  to  their  work, 
the  whole  force  may  be  kept  idle.  In  a  manufac- 
turing industry  the  machinery  must  start  prompt- 
ly and  be  kept  in  motion  continuously.  In  the 
business  of  transportation  there  can  be  no  delay 
in  starting  trains  or  cars.  A  system  of  rules  is 
necessary,  and  it  must  be  strictly  enforced.  Neg- 
ligence, idleness,  and  inefficiency  must  be  checked 
by  fines  and  penalties.  In  short,  whenever  large 
numbers  of  men  are  engaged  in  a  common  em- 
ployment,  discipline   must   be   maintained;    and 


RKLATU)NS    IN    CORrORATl':    INDUSTRY.         QI 

discipline  is  in  itself  odious  to  mankind.  It  in- 
volves a  surrender  of  liberty,  which  may  be  indis- 
pensable, and  in  the  end  advantageous,  but  which 
is  intrinsically  unpleasant.  'The  fatlici-  of  a  fam- 
ily may  secure  the  obedience  of  his  ciiildrcn  with- 
out making  his  control  evident;  but  if  ho  sends 
his  children  to  school  with  others,  the  Icachcr 
can  scarcely  avoid  insist  ins;"  upon  Ihcir  compli- 
ance with  formal  roi^iilations;  and  the  same 
principle  applies  to  every  aggregation  of  hu- 
manity. 

In  such  cases  we  easily  recognise  the  truth 
that  a  partial  surrender  of  liberty  on  the  part 
of  individuals  results  in  a  positive  increase  of  the 
amount  of  liberty  collectively  enjoyed.  The 
same  truth  must  be  recognised  in  the  emjjloy- 
ment  of  human  beings  in  C()ri)orate  industries. 
The  discipline  enforced  is  a  necessary  condition 
of  their  effective  production — that  is,  of  their 
employment  at  all — and  if  it  is  not  needlessly  se- 
vere it  furnishes  no  legitimate  ground  of  com- 
plaint. We  have  seen  that  the  compensation  of 
labourers  employed  by  corporations  is  ])rcjbably 
on  the  whole  somewhat  greater  than  that  of  the 
employees  of  individuals,  and  the  additional  com 
pensation  must  be  considered — in  view  of  tlu-  fad 
that  the  service  of  corporations  is  generally 
sought  by  labourers — as  a  sullicient   e(|uivalent 


92  IN'nrSTKIAL    FKKF.DOM. 

for  wlmtcvcr  loss  of  liberty  may  appear  to  be 
involved  ill  the  submission  to  discipline. 

If  we  would  incpiire  whether,  as  a  matter  of 
fact,  the  rules  imi)osed  by  corporations  on  their 
employees  are  unnecessarily  harsh,  we  should 
find  some  evidence,  at  least,  showinj;  that  on  the 
whole  this  is  not  true.  Dishonesty  among  the 
cmjiloyees  of  transportation  companies  intrusted 
with  tlu-  collection  of  fares  is  notoriously  one 
of  the  greatest  difticultics  with  which  the  man- 
agers of  these  companies  have  to  contend,  and 
it  requires  drastic  remedies.  Wherever  pecula- 
tion is  feasible,  experience  proves  that  it  must 
be  guarded  against,  and  the  offence  is  so  serious 
that  hardly  any  precautions  can  be  excessive. 
Incessant  quarrels  over  these  and  other  disci- 
plinary regulations  take  place,  some  of  them  of 
such  extent  as  to  arouse  public  interest.  But 
when  these  disturbances  are  investigated  by 
commissions,  the  official  reports  generally  show 
that  the  evidence  offered  by  dissatisfied  em- 
ployees is  very  weak.  Much  of  it  proves  to  be 
actually  false,  while  the  acts  of  the  employers 
that  occasion  complaint  are  found  to  be  not  be- 
yond the  legitimate  exercise  of  discipline.  It 
is  true  that  they  are  often  misunderstood,  and 
that  trouble  might  have  been  avoided  by  con- 
ciliatory methods  on  the  part  of  employers.     On 


RELATIONS  IN  CORPORATE  INDUSTRY.    93 

the  other  hand,  the  acts  of  the  men  are  often 
too  hasty  and  violent  to  give  opportunity  for 
mediation  or  explanation,  while  they  are  some- 
times positively  malicious. 

The  Pullman  strike,  for  instance,  was  precipi- 
tated by  the  act  of  the  company  in  laying  off  a 
number  of  workmen  temporarily,  because  the 
work  on  which  they  were  engaged  was  completed 
and  there  was  at  the  time  nothing  for  them  to  do. 
Among  this  number  were  two  or  three  who  had 
taken  part  in  an  appeal  for  higher  wages,  and 
the  impression  became  prevalent  among  the 
workmen  that  these  persons  were  permanently 
discharged  because  of  their  participation  in  this 
movement.  This  belief  led  to  an  immediate 
strike,  without  any  demand  for  explanation,  and 
so  far  as  this  point  is  concerned  the  acts  of  the 
employers  seem  to  demand  no  criticism. 

It  is  perhaps  commonly  believed  that  it  was 
the  poHcy  of  this  company  to  compel  its  em- 
ployees to  Hve  in  its  "  model  tenements  "  and  to 
pay  rent  for  many  conveniences  and  luxuries 
which  they  may  or  may  not  have  desired.  That 
this  belief  is  ill  founded  appears  from  the  fact 
that  at  the  time  of  the  strike  only  about  one 
third  of  the  employees  of  the  company  were  its 
tenants.  Furthermore,  an  examination  of  the 
regulations  enforced  on  the  company's  property 


(j\  IN'I)['STkI.\I.    IKI.KDOM. 

will  satisfy  any  one  conversant  witii  such  mat- 
ters that  they  were  not  only  judicious  hut  neces- 
sary. It  is  impossihle  to  maintain  the  character 
of  a  "  model  "  tenement  without  compelling 
dirty  and  disorderly  people  to  conform  to  a  hij^her 
standard  than  that  to  which  they  are  used.  That 
is  the  very  object  aimed  at  in  the  construction 
of  such  tenements.  Whatever  surrender  of  lib- 
erty is  involved  in  such  conformity  is,  from  every 
point  of  view,  well  paid  for.  No  workinj^^man 
can  properly  appeal  to  the  sympathies  of  the 
benevolent  if  he  rc.c:ards  the  prohibition  of  liquor 
shops  and  bawdy  houses  in  the  neighbourhood 
of  his  abode  as  an  odious  manifestation  of 
despotic  power,  and  prefers  in  the  name  of  lib- 
erty to  bring  up  his  children  in  the  midst  of  all 
manner  of  physical  and  moral  nuisances. 

Considering  the  advantages  enjoyed  by  the 
tenants  of  the  Pullman  Company,  their  rents  do 
not  seem  to  have  been  higher  than  those  paid 
in  adjoining  towns.  As  a  matter  of  fact,  the 
rents  charged  by  the  company  amounted  to  little 
more  than  one  half  what  would  have  been  a  fair 
return  on  the  investment  if  it  had  been  regarded 
as  purely  a  matter  of  business;  and  if  the  rents 
WTre  not  reduced  when  wages  were  lowered,  it 
is  to  be  remembered  that  they  had  never  been 
increased  during  the  preceding  years  of  prosper- 


RELATIONS  IN  CORPORATE  INDUSTRY.    95 

ity  and  high  wages.  Nor  was  the  collection  of 
rents  enforced  with  anything  like  the  severity 
commonly  found  necessary  by  landlords.  At  the 
beginning  of  the  strike  its  tenants  owed  the 
Pullman  Company  some  $50,000  for  rent  due 
and  unpaid,  and  at  the  end  of  it  this  sum  must 
have  been  greatly  increased,  as  no  eviction  for 
this  cause  had  taken  place.  Only  a  small  portion 
of  this  indebtedness,  it  is  safe  to  say,  has  ever 
been  paid,  and  under  such  circumstances  the 
complaints  of  intolerable  oppression  in  the  ex- 
action of  rents  scarcely  deserve  serious  attention. 
At  all  events,  the  tenants  of  the  Pullman  Com- 
pany, Hke  the  ancient  Hebrews,  appear  to  have 
judiciously  despoiled  their  oppressors  as  a  pre- 
liminary to  making  their  escape. 

It  is  a  mistake  to  suppose  that  the  managers 
of  corporations  have,  as  a  rule,  no  personal 
friendly  relations  with  their  men.  In  corpora- 
tions of  moderate  size  the  reverse  is  very  com- 
monly the  case,  and  many  provisions  are  made 
for  the  comfort  of  employees,  both  in  health  and 
sickness.  The  chief  managers  of  large  corpora- 
tions, it  is  true,  can  have  little  opportunity  for 
direct  acquaintance  with  the  great  body  of  the 
workmen  in  their  service,  but  in  such  cases  there 
are  necessarily  many  subordinate  managers 
whose  duty  it  is  to  know  the  characters  of  the 


96  INnrSTRIAI.    rRKF.DOM. 

iiulivifhials  ulioiii  tlu-y  direct,  and  to  whom  it  is 
unju.sl  to  impute  iiiluimatiity  without  more  evi- 
dence than  has  been  hitlierto  produced.  The 
testimony  as  to  such  inhumanity  is  jjcncrally 
of  the  vaguest  kind,  and  often  demonstral^ly 
false.  No  doubt,  as  was  observed  above,  the  e.x- 
crcise  of  power  by  one  human  bein^  over  another 
is  ne\er  unattended  with  tlie  d.'in.L,a'r  of  abuse, 
and  is  fre(|uently  abused.  lUit  there  is  httle 
reason  in  tlie  nature  of  things  wliy  the  agents 
of  corporations  should  be  more  cruel  than  others 
who  employ  labourers  directly,  and  it  is  the  opin- 
ion of  those  conversant  with  the  factory  acts, 
both  in  former  days  and  at  present,  that  work- 
men are  better  treated  in  large  establishments 
than  in  small  ones.  Their  very  numbers  make 
it  practicable  to  furnish  conveniences  which  the 
employer  of  a  few  hands  could  not  afford. 

Many  of  our  great  corporations  maintain  li- 
braries, schools,  and  hospitals  for  their  men,  and 
manifest  a  much  greater  degree  of  solicitude  for 
their  welfare  than  the  public  that  obtains  its 
information  from  the  newspapers  would  suppose. 
Even  the  vilified  Pullman  Company  kept  a 
physician  to  attend  to  the  injuries  of  its  em- 
ployees, and  paid  their  expenses  while  in  hos- 
pital, as  well  as  the  charges  of  specialists  when 
their    services    were    needed.      While    managers 


RELATIONS    IN    CORPORATE    INDUSTRY.         97 

may  go  somewhat  further  in  such  benevolence 
than  the  technical  requirements  of  their  trust 
would  justify,  it  is  doubtful  if  an  instance  can 
be  produced  where  stockholders  have  made  com- 
plaint of  their  liberahty,  although  there  are  many 
where  they  have  encouraged  it. 


CHAPTER  VIII. 

CORPORATIONS    POSSESSING    MONOPOLIES. 

Some  reasons  have  l)een  already  given  for 
the  concUision  that  a  corporation  cnjoyinp  a  mo- 
nopoly is  unlikely  to  pay  the  men  in  its  employ 
lower  wages  than  they  can  elsewhere  obtain.  It 
was  explained  that,  according  to  the  common 
view,  monopoly  consists  in  the  enjoyment  of  ex- 
cessive profits — that  is,  of  profits  greater  than 
are  generally  obtained  by  capital,  after  making 
allowance  for  all  conditions  tending  to  produce 
inequality  of  returns.  Where  monopoly  of  this 
kind  exists,  it  is  undoubtedly  believed  by  many 
persons  that  exceptional  gains  should  not  be  the 
absolute  property  of  the  owners  of  the  capital 
employed,  but  that  the  workmen  have  some 
claim  to  them.  They  reason  that  the  product 
of  the  industry  is  the  result  of  the  co-operation 
of  labour  and  capital,  and  that  if  this  product  is 
exceptionally  great,  it  is  inequitable  for  the  em- 
ployers to  appropriate  the  whole  of  the  excep- 
tional profit  made  upon  it  as  their  share,  leaving 

93 


CORPORATIONS    POSSESSING    MONOPOLIES.         99 

to  the  labourers  only  the  ordinary  rate  of  wages. 
Those  who  entertain  these  opinions  seldom  at- 
tempt to  determine  the  proportion  in  which  the 
abnormal  profits  ought  to  be  divided;  but  they 
are  convinced  that  justice  requires  that  some 
division  be  made,  and  they  are  disposed  to  en- 
courage all  professed  attempts  to  bring  it 
about,  without  perhaps  considering  how  far 
such  attempts  are  really  calculated  to  promote 
justice. 

If  we  reflect  upon  the  problem,  however,  we 
are  at  once  struck  with  the  fact  that  unless  the 
exceptional  profits  made  by  a  monopoly  are  in 
some  way  due  to  exceptional  exertions  on  the 
part  of  the  labourers  employed,  justice  forbids 
these  labourers  to  claim  any  part  of  them.  We 
are  not  considering  their  claims  as  a  matter  be- 
tween them  and  their  masters,  but  as  members 
of  the  labouring  class  at  large.  If  the  men  em- 
ployed in  a  certain  industry  receive  higher  wages 
than  other  labourers,  although  their  sacrifices  are 
no  greater,  it  is  plain  that  these  other  labourers 
may  properly  be  dissatisfied.  We  can  recognise 
here  no  lord  of  the  vineyard,  doing  as  he  will 
with  his  own,  for  we  must  maintain  as  our  stand- 
ard of  justice  the  equality  of  reward  with  sacri- 
fice. To  contend  that  justice  to  labourers  is  pro- 
moted by  enforcing  the  exceptional  compensa- 


lOO  INDUSTKIAI.    IRKEDOM. 

tif)ii  of  those  who  have  rendered  no  exceptional 
service  involves  us  in  obvious  inconsistency. 

According  to  the  supposition  commonly 
made,  the  monopolistic  gains  arc  secured  by  levy- 
ing a  tax  on  the  purchasing  community.  By 
some  inequitable  means  the  ordinary  laws  of  sup- 
ply and  demand  are  controlled,  and  all  buyers 
are  compelled  to  pay  an  unreasonable  price  for 
the  monopolized  commodity.  To  insist  that 
any  part  of  these  unjust  gains  justly  belongs  to 
those  labourers  who,  by  the  customary  degree 
of  exertion,  have  assisted  in  producing  them, 
is  not  only  contradictory  on  its  face,  but  is 
also  extremely  well  calculated  to  aggravate  the 
discontent  and  envy  already  prevailing.  The 
favoured  class  of  labourers  would  then  occupy 
the  position  of  participating  in  profits  extorted 
from  their  less  fortunate  brethren.  They  would 
perhaps  not  be  so  unselfish  as  to  refuse  to  par- 
ticipate in  gains  of  this  character.  Hardly  any 
class  of  men  appears  in  practice  to  carry  unselfish- 
ness to  such  a  degree  as  this.  They  would  de- 
fend their  action  by  various  sophistical  argu- 
ments, the  most  forcible  of  which  would  be  that 
if  they  did  not  secure  these  profits  their  em- 
ployers would,  and  that  therefore  neither  the 
community  at  large  nor  any  other  class  of  la- 
bourers could  sulTer  any  injury.     The  prejudice 


CORPORATIONS    POSSESSING    MOST'qP'OJLlES.        ICCl' 

against  monopolies  is  so  str-pno'^a.-?  tojrii^kc  such 
arguments  specious,  but  it  is  a  travesty  of  jus- 
tice to  offer  them  in  its  name.  The  profits  of 
the  monopoly  are  really  exacted  from  the  pur- 
chasing community,  including  workmen,  and 
workmen  that  participate  in  them  must  confess 
that  their  increased  rewards  are  derived  from 
a  fund  created  by  decreasing  the  rewards  of  their 
fellows. 

Were  there  any  reason  to  think  that  the  par- 
ticipation of  the  workmen  in  the  profits  of  the 
monopoly  would  tend  to  extinguish  these  profits, 
this  conclusion  might  require  some  modification. 
Such  participation,  however,  would  have  a  di- 
rectly opposite  tendency.  Under  our  form  of 
government,  where  all  workmen  have  the 
suffrage,  it  would  be  peculiarly  dangerous  for 
those  employed  in  a  monopolized  industry  to  feel 
that  they  are  to  be  the  gainers  by  maintaining 
its  excessive  profits.  Their  employers  are  under 
continual  temptation  to  influence  their  poHtical 
action — a  temptation  which,  it  must  be  said,  they 
have  sometimes  been  unable  to  resist.  So  long 
as  these  workmen  receive  no  exceptional  re- 
muneration, the  scepticism  with  which  they 
naturally  listen  to  the  representations  of  their 
employers  may  be  sufficient  to  preserve  their  in- 
dependence; but  if  they  became  convinced  that 


]n2  is\)j'\\n\i.   Mi  I, I. IX  ».Nt. 

nn  Appi'ccialilc  '\)hcl  (.A  llic  excessive  gains  of  the 
monopcjly  really  fell  to  their  share,  they  would 
almost  infallibly  combine  with  their  masters  to 
perpetuate  these  gains. 

Under  universal  sufTragc  these  combinations 
might  attain  such  strength  as  to  be  irresistible. 
They  would  dictate  legislation,  and  make  the  at- 
tempt to  overthrow  privilege  hopeless.  But  if 
justice. is  violated  by  the  existence  of  monopolies, 
the  friends  of  justice  must  take  care  to  do  noth- 
ing to  increase  their  power.  It  is  the  aim  of  true 
reformers  to  do  away  with  all  exclusive  privileges, 
as  tending  to  diminish  lil)crty,  and  to  hinder  the 
attainment  of  equality  of  opportunities  for  de- 
velopment. Success  in  this  endeavour  is  possi- 
ble under  our  form  of  government  only  through 
the  generous  and  enlightened  co-operation  of  the 
working  people.  They  must  come  to  under- 
stand that  progress  consists  in  enlarging  the  op- 
portunities of  all,  and  not  in  securing  special 
advantages  for  a  few  at  the  expense  of  the  re- 
mainder. Hence  it  is  altogether  deplorable  if 
they  arc  led  to  suppose  that  the  cause  of  "  la- 
bour "  is  advanced  by  its  obtaining  a  share  of  in- 
equitable gains.  The  condition  of  labourers  as 
a  whole  can  be  improved  only  by  the  increase 
of  their  aggregate  remuneration.  It  is  true  that 
this  aggregate  must  be  made  up  of  the  remunera- 


CORPORATIONS    POSSESSING    MONOPOLIES.       IO3 

tion  of  individuals;  but  it  is  not  true  that  it  can 
be  enlarged  by  permitting  certain  individuals  to 
remunerate  themselves  by  appropriating  from 
the  common  dividend  a  share  out  of  proportion 
to  their  services  in  creating  it. 

On  this  account  the  growth  of  the  labour 
unions  must  be  regarded  with  some  apprehen- 
sion. They  have  probably  been  able  in  some 
cases  to  obtain  higher  wages  from  their  masters 
than  the  services  of  their  members  were  worth 
in  the  market,  and  if  they  have  accomplished 
this  without  depressing  the  wages  of  other  la- 
bourers, their  success  may  not  have  been  in 
conflict  with  justice.  But  it  is  the  practice  of 
most  of  these  unions  to  restrict  their  member- 
ship, and  to  prevent  labourers  who  are  not  mem- 
bers from  working  at  their  trade.  So  far  as  they 
are  successful  in  this,  these  excluded  workmen 
are  forced  into  other  industries,  thus  causing  in 
these  industries  an  unnatural  supply  of  labour- 
ers, whose  competition  leads  to  a  reduction  in 
the  rate  of  wages.  Since  it  is  not  easy  to  recon- 
cile this  result  with  justice,  the  members  of  the 
unions  are  naturally  tempted  to  claim  that  out- 
side labourers  are  their  inferiors,  and  they  seem 
very  quickly  to  acquire  the  jealous  and  hateful 
temper  of  other  monopolists.  When  we  con- 
sider   that    in    Great    Britain,    where    the    trade 


I04  INDI'STUIAL    FREEDOM. 

unions  have  attained  their  hij^hcst  development, 
they  tlo  not  comprehend  more  than  a  tenth  of 
the  lal)ouring  class,  it  is  easy  to  see  that  they 
constitute  an  oligarchy  which  holds  power  by 
a  precarious  tenure,  and  which  is  therefore  only 
too  ready  to  resent  criticism  and  opposition. 

There  is  nothing  surprising,  therefore,  in  the 
desire  expressed  by  many  of  the  representatives 
of  these  unions,  that  tiic  Government  should  as- 
sume the  control  and  ownership  of  their  indus- 
tries. Were  they  satisfied  that  their  labour  re- 
ceived no  higher  compensation  than  that  of 
similar  labour  in  general,  they  would  have  no 
particular  inducement  to  make  this  compensation 
a  permanent  charge  on  the  whole  people.  Since 
they  desire  to  accomplish  this  result,  it  is  reason- 
able to  suppose  that  they  expect  in  this  way  to 
make  sure  of  the  continuance  of  some  exclusive 
privileges,  which  they  may  otherwise  lose.  Un- 
less they  can  show  that  their  possession  of  such 
privileges  is  somehow  beneficial  to  those  who 
are  excluded  from  them,  they  must  make  their 
appeal  in  some  other  name  than  that  of  justice. 

The  same  criticism  applies  to  the  payment 
by  public  corporations  of  wages  and  salaries 
higher  than  are  paid  for  similar  service  by  pri- 
vate persons.  The  revenue  of  these  corpora- 
tions is  derived  from  the  income  of  their  citizens. 


CORPORATIONS    POSSESSING    MONOPOLIES.       I05 

One  is  increased  by  diminishing  the  other.  If 
the  Government  pays  higher  wages,  it  can  not 
employ  so  many  men  as  would  have  been  em- 
ployed with  the  same  fund  in  private  hands;  and 
the  diminished  capital  in  private  hands  must  be 
distributed  as  wages  among  a  relatively  larger 
number.  Government  officers  and  employees 
are  thus  favoured  at  the  expense  of  other  work- 
ers. A  privileged  class  of  citizens  is  created  in 
violation  of  the  principles  of  our  Government  as 
well  as  those  of  justice. 

"  It  is  evident  from  what  has  just  been  said 
that  the  existence  of  a  class  of  employees  fa- 
voured by  Government  arouses  envy.  The  ques- 
tion is  not  to  be  complicated  with  any  assump- 
tion that  the  employees  of  Government  are  a 
superior  class.  In  so  far  as  they  are  superior 
they  are  entitled  to  higher  compensation.  If 
their  fitness  has  been  determined  by  competitive 
examination,  they  may  justly  claim  preferment 
over  those  that  are  proved  unfit.  But  the  com- 
parison must  be  made  not  between  the  fit  and 
the  unfit,  but  between  the  fit  who  get  the  places 
and  the  fit  who  do  not.  It  is  to  be  expected 
that  the  incapable  will  be  envious.  Had  they 
sufficient  magnanimity  not  to  be  envious,  they 
would  not  be  very  apt  to  be  incapable.  Such 
virtue  would  imply  ability.      Their  envy,  how- 


Io6  INDUSTKIAL    FRKKDOM. 

ever,  wliilr  it  may  he  a  serious  evil  so  lonj^f  as 
ai>|)oiiiliHciUs  arc  made  without  regard  to  merit 
and  as  rewards  for  party  services,  is  nothing  that 
needs  he  considered  under  tlic  competitive  sys- 
tiin.  1 1  is  a  part  of  their  general  discontent 
with  the  universe  and  tlicir  disapprobation  of 
the  i)rocesses  of  natural  selection.  They  can  not 
succeed  because  they  do  not  deserve  to  succeed; 
and  if  we  have  a  system  under  which  desert  brings 
success,  we  can  not  rdiiKiuish  it  because  of  the 
complaints  of  the  undeserving,  no  matter  how 
much  wc  may  pity  them. 

"  It  is  otherwise  when  men  arc  excluded  not 
because  they  arc  unfit,  but  because  others  have 
crowded  in  l:)cfore  them.  We  are  familiar  with 
the  spectacle  of  a  crowd  of  applicants  for  every 
position  under  Government,  and  we  know  that 
often  many  of  such  applicants  are  unfit  for  any 
position.  We  are  not  yet  familiar  with  the  spec- 
tacle of  a  crowd  of  meritorious  applicants;  but 
if  the  compensation  attached  to  such  positions 
is  greater  than  can  be  earned  elsewhere  by  like 
service,  this  spectacle  will  infallibly  be  presented. 
If  this  compensation  were  no  more  than  what 
could  be  otherwise  earned,  the  number  of  office 
seekers  would  be  diminished  until  the  supply  was 
equal  to  the  demand.  But  if  this  is  not  the 
case,  those  who  fail  to  secure  office  through  no 


CORPORATIONS    POSSESSING    MONOPOLIES.       lO/ 

fault  of  their  own  will  naturally  be  envious.  They 
will  be  angry  at  what  they  properly  regard  as 
injustice,  and  their  grievance  will  have  danger- 
ous consequences. 

"  For  those  who  by  favour  or  fortune  have 
secured  privileged  places  will  do  what  all  priv- 
ileged classes  have  done  in  the  past.  They  will 
be  apprehensive  of  losing  advantages  to  which 
they  feel  their  title  is  of  doubtful  justice,  and 
they  will  combine  to  protect  themselves.  This 
is  no  speculative  peril.  The  Legislature  of  New 
York  has  more  than  once  responded  to  combina- 
tions of  this  kind  with  increases  of  salaries,  and 
such  increases  have  been  procured  by  corrupt 
means  and  are  available  for  corrupt  purposes. 
Were  the  salaries  only  such  as  are  paid  in  the 
competitive  market,  such  corruption  would  be 
impossible.  Rather  than  pay  assessments,  office- 
holders would  run  the  risk  of  being  removed, 
considering  that  they  could  do  as  well  else- 
where as  in  the  public  service.  But  if  they  know 
that  their  official  pay  is  greater  than  they  can 
obtain  in  private  life,  the  temptation  is  strong  to 
buy  security.  And  as  those  who  are  in  will  pay 
to  stay  in,  so  those  who  are  out  will  pay  to  get 
in.  They  will  beset  the  Legislature  with  their 
appeals.  They  will  insist  upon  the  creation  of 
new  offices  and  the  extension  of  governmental 


io8  iNDrsTKiAi.  rKF:i:i)f)M. 

activity.  And  tlifir  opponents  will  labour  under 
the  immense  disadvantaj^e  of  havinj;  to  defend 
a  system  which  is  indefensible,  and  to  justify 
what  is  unjust."  * 

Wo  have  hitherto  adopted  the  popular  defi- 
nition of  monoj)oly  as  consisting  in  the  enjoy- 
ment of  unusually  large  profits.  But,  as  will  be 
shown  later,  such  profits  may  be  the  result  of 
more  economical  production  and  superior  busi- 
ness management,  in  which  case  they  may  involve 
no  injustice.  We  must  therefore  add  to  the 
popular  conception  the  idea  of  privilege — that  is, 
the  possession  of  advantages  which  enable  those 
who  have  them  to  obtain  exceptional  gains  with- 
out any  equivalent  service  or  sacrifice.  Such 
monopolies  may  be  rudely  classified  as  natural 
and  artificial.  What  may  be  called  a  natural 
monopoly  arises  when  exclusive  privileges 
come  to  be  possessed  by  certain  individuals  as 
an  incidental  result  of  human  laws  and  institu- 
tions. The  laws  providing  for  the  acquisition 
and  transfer  of  property,  for  instance,  may  often 
create  a  species  of  monopoly  in  the  ownership 
of  land  through  the  operation  of  the  economic 
principle  of  rent.  On  the  other  hand,  a  mo- 
nopoly produced  intentionally  may  be  properly 

*  Extracted  from  an  article  in  the  Forum,  September,  1S95,  en- 
titled "  Municipal  Progress  and  the  Living  Wage." 


CORPORATIONS    POSSESSING    MONOPOLIES.        IO9 

denominated  artificial.  Such  monopolies  are  de- 
liberately created  by  bounties  and  by  customs 
duties  on  the  importation  from  abroad  of  goods  of 
the  same  nature  as  those  produced  at  home.  To 
determine  what  is  required  by  abstract  justice, 
in  the  case  of  these  artificial  monopoHes,  is  a 
matter  of  no  Httle  difficulty.  It  is  evidently  the 
intention  of  the  Legislature,  and  presumptively 
therefore  of  the  majority  of  the  people,  to  insure 
exceptional  profits  to  certain  classes  by  restrict- 
ing the  competition  to  which  they  would  natu- 
rally be  exposed.  The  acquisition  of  these  profits 
by  such  persons  is  therefore  precisely  what  was 
in  contemplation  by  the  Government,  and  it  is 
inconsistent  for  the  public  to  complain  of  it  as 
unjust.  It  may  indeed  be  denounced  by  those 
who  oppose  such  legislation  in  general,  but,  ac- 
cording to  the  supposition,  public  opinion  is 
against  them. 

We  must  therefore  conclude  that,  according 
to  the  common  standard  of  morality,  the  profits 
of  these  artificial  monopolies  are  not  unjust;  and, 
if  they  are  not  unjust,  it  is  absurd  to  maintain 
that  justice  requires  those  who  receive  them, 
whether  corporations  or  individuals,  to  divide 
them  with  their  workmen.  The  latter  may  in- 
deed set  up  some  tacit  understanding  that  they 
should  share  in  these  gains,  but  there  is  nothing 


no  INDL'STRIAL    FRKIIx  )M. 

ill  I  lie  l.iw  In  justify  their  claim.  It  h,  and  al- 
ways lias  been,  the  policy  of  jjioteclivc  statutes 
to  suhsidize  employers  and  ncU  workmen,  the 
assumption  being  tliat  the  benefits  arising  from 
this  policy  were  diffused  throughout  the  coun- 
try, and  that  if  the  workmen  in  the  protected 
industries  obtained  the  ordinary  rate  of  wages 
they  should  be  content.  There  may  be  some 
points  of  honour  in  these  cases,  as  in  others  aris- 
ing from  the  division  of  spoils;  but  enough  has 
been  said  to  show  that  justice  is  not  to  be  in- 
voked in  such  disputes. 

Corporations  enjoying  natural  monopolies  are 
at  first  sight  without  defence  to  the  charge  of 
making  unjust  gains.  They  can  plead  no  delib- 
erate legislative  sanction  for  their  exactions,  for 
the  institutions  of  which  they  arc  the  outgrowth 
were  not  established  for  the  purpose  of  creating 
exclusive  privileges.  So  far.  therefore,  as  their 
profits  arc  in  excess  of  the  ordinary  returns  of 
capital,  and  not  due  to  any  exceptional  ability 
on  the  part  of  their  managers,  it  does  not  seem 
possible  to  deny  that  they  are  unjust.  Xo  evi- 
dence, however,  is  forthcoming  to  show  that  such 
corporations  exercise  any  greater  control  over 
their  workmen  than  other  employers,  and  in- 
deed wc  have  seen  reason  to  suppose  that  the 
compensation   paid   by   them   will   be  somewhat 


CORPORATIONS    POSSESSING    MONOPOLIES.        Ill 

higher  than  is  customary.  Hence,  upon  the 
grounds  already  explained,  the  particular  set  of 
workmen  employed  by  these  corporations  have 
no  claim  to  participate  in  their  exceptional 
profits.  Such  profits  must  be  regarded  as  in 
equity  belonging  to  the  whole  community,  out 
of  whose  revenue  they  are  collected,  and  not  to 
any  particular  members  of  that  community.  The 
attainment  of  justice  must  in  such  a  case  consist 
either  in  the  distribution  of  these  profits  among 
the  whole  community,  or  else  in  their  total  sup- 
pression. The  corporations  should  either  be 
subjected  to  taxation  of  such  an  amount  as  will 
equal  their  excessive  revenue,  or  else  they  should 
be  deprived  of  the  power  to  secure  this  excess- 
ive revenue. 

As  a  matter  of  fact,  the  nature  and  extent 
of  these  excessive  gains  by  corporations  are  com- 
monly exaggerated.  So  far  as  the  ownership 
of  land  is  concerned,  which  is  regarded  by  many 
persons  as  the  greatest  of  all  monopolies,  indi- 
viduals and  corporations  stand  on  the  same  foot- 
ing. If  it  is  unjust  for  the  latter  to  own  land, 
it  must  be  for  the  same  reasons  unjust  for  the 
former;  and  since  we  are  at  present  considering 
only  such  charges  of  injustice  as  apply  to  cor- 
porations and  not  to  individuals,  we  need  not 
dwell  on  this  controverted  question.     Apart  from 


112  INDt'STRIAL    FREEDOM. 

this  monopoly,  \vc  should  tiiul  it  ditVicult  to  name 
many  cori)orati(jns  that  jxjsscss  exclusive  priv- 
ileges to  any  great  extent,  or  at  least  to  any 
greater  extent  than  individuals.  The  most  con- 
spicuous monop(jlies  in  the  public  view  arc  the 
railroads,  and  their  power  to  charge  excessive 
rates  is  uncjuestionably  due  principally  to  their 
possession  of  advantageous  sites  and  routes.  But, 
conceding  that  the  monopoly  of  railroads  is  due 
to  other  causes,  we  find  on  examination  that  it 
has  been  confined  within  very  narrow  limits.  It 
is  notorious  that  the  rates  charged  in  this  coun- 
try arc  much  lower  than  those  that  prevail  else- 
where, and  it  is  equally  notorious  that  a  vast 
amount  of  the  capital  invested  in  railroads,  far 
from  producing  excessive  profits,  actually  pro- 
duces no  profit  at  all.  It  is  true  that  the  figures 
expressing  railroad  capitalization  are  largely  fic- 
titious, but.  making  allowance  for  this,  it  re- 
mains true  that  the  average  returns  on  the  capital 
actually  expended  are  less  than  the  rate  of  profit 
ordinarily  expected  by  individuals.  It  is  true, 
also,  that  the  wealth  of  many  railroads  has  very 
greatly  increased  through  the  increase  in  the  gen- 
eral wealth  of  the  country  and  the  growth  of  its 
population.  Such  increase,  it  must  be  remem- 
bered, has  also  taken  place  in  the  wealth  of  in- 
dividuals, and  their  property  in  this  increase  has 


CORPORATIONS    POSSESSING    MONOPOLIES.       II 3 

not  been  assailed  by  the  Legislature.  The  case 
is  altogether  different  with  railroads.  Their 
profits,  in  spite  of  their  apparent  monopolies, 
have  been  continually  reduced  by  legalized  com- 
petitors, their  charges  have  been  reduced  by  stat- 
ute, and  their  property  lessened  by  taxation. 

To  state  the  figures  that  support  these  ob- 
servations would  be  impracticable  in  an  essay 
of  this  kind.  A  single  illustration,  however,  will 
indicate  the  character  of  these  figures.  Mr. 
Blackstone,  the  President  of  the  Chicago  and 
Alton  Railroad,  recently  called  attention  to  the 
fact  that  in  1877  all  the  property  in  the  State 
of  Illinois,  except  railroads,  was  assessed  for  tax- 
ation at  a  valuation  of  about  $892,000,000,  while 
in  1895  the  valuation  was  only  $753,000,000 — a 
decrease  in  nineteen  years  of  almost  $140,000,- 
000,  or  about  15^  per  cent.  The  property  of  the 
railroads  in  the  State  was  valued  at  $37,141,000 
in  1877,  and  at  $79,231,000  in  1895,  an  increase 
of  112)2  peJ*  cent.  It  is  true  that  the  actual  value 
of  the  railroads  has  increased,  since  their  mileage 
is  47  per  cent  greater,  and  their  net  earnings  40 
per  cent  larger;  but,  on  the  other  hand,  it  is 
notorious  that  the  value  of  other  property  has 
also  very  greatly  increased  instead  of  diminish- 
ing. Were  it  otherwise,  it  would  be  altogether 
impossible  to  explain  the  enormous  increase  In 


114  INDUSTKI.M.    FUKi:U(>M. 

the  iiuiuhcr  of  passengers  and  the  amount  of 
frci^lit  carrieil.  The  growth  of  the  city  of  Chi- 
cago has  hccii  procUgious,  hut  property  appears 
to  I)c  assessed  there  at  a  nominal  figure.  It 
woultl  he  far  from  increihhlc  that  hetween  1S77 
and  1895  property  in  lUinois  increased  in  actual 
value  by  an  amount  several  times  greater  than 
its  assessed  valuation. 

The  i)roportion  of  taxes  borne  by  the  rail- 
roads is  therefore  far  greater  than  formerly,  and 
in  the  year  1894  it  amounted  to  about  jj)^  i)er 
cent  of  the  total  sum  of  the  dividends  earned 
in  Illinois  by  the  railroads  operating  there. 
From  the  report  of  the  railroad  commissioners 
of  that  State  for  1894,  according  to  Mr.  Black- 
stone's  statement,  the  railroads  therein  earned 
$i.7JO.ooo  less  than  their  fixed  charges,  while 
their  debit  balances  were  increased  by  $12,978,- 
000.  They  transported  over  83.000.000  passen- 
gers during  that  year,  the  average  journey  being 
about  27  miles,  and  the  average  fare  about  S\ 
cents  less  than  the  average  cost  of  carriage. 
Shortly  after  making  this  report  the  Railroad 
Commission  issued  an  order  for  the  reduction  of 
the  rates  on  freight.  Even  if  these  figures  are 
not  altogether  accurate,  it  is  impossible  to  main- 
tain that  they  indicate  the  existence  of  any  op- 
pressive railroad  monopoly.      They  rather  indi- 


CORPORATIONS    POSSESSING    MONOPOLIES.        II 5 

cate  the  confiscation  of  railroad  property,  and 
there  seems  to  be  much  reason  in  Mr.  Black- 
stone's  complaint  that  "  the  people  are  as  confi- 
dent that  they  have  the  right  to  demand  and 
enforce  railway  service  upon  such  terms  as  may 
be  in  accordance  with  their  will  and  pleasure  as 
ever  men  were  of  their  right  to  demand  and  en- 
force services  on  like  terms  from  persons  who 
were  subject  to  their  power."  This  may  fairly  be 
characterized  as  the  obverse  side  of  "  industrial 
slavery." 

Similar  complaints  are  heard  from  other 
States;  but  it  is  not  necessary  to  accumulate 
evidence  on  this  point.  Those  who  examine  the 
returns  of  railways  find  many  suspensions  of  divi- 
dends, great  decreases  of  revenue,  frequent  re- 
ductions of  operating  expenses;  but  they  seldom 
find  any  reduction  of  taxes.  These  remain  the 
same,  or  are  increased,  no  matter  how  much  the 
value  of  the  property  decHnes.  The  aggregate 
amount  of  these  taxes  is  very  large;  but  the 
newspaper  writers,  who  furnish  the  common  peo- 
ple with  all  their  information,  seldom  allude  to 
it.  They  are  more  inclined  to  raise  the  cry  that 
owners  of  railroad  stocks  escape  taxation,  al- 
though they  should  know  that  the  property  from 
which  such  stockholders  receive  their  income  fre- 
quently pays  larger  amounts  in  taxes  than  in  divi- 


Il6  INOUSTUIAL    I-RKKDOM. 

(Ifiuls,  and  prohahly,  as  a  rule,  i)ays  at  a  higher 
rate  than  property  owned  by  indivi(kials. 

While  these  complaints  ol  unjust  taxation 
are  heyond  (juestion  to  a  great  extent  well 
founded,  they  fail  to  make  allowance  for  a  fact 
of  much  importance.  The  deplorable  condition 
of  these  railways  is  primarily  due  to  their  own 
contests.  In  other  words,  so  far  from  enjoying 
a  monopoly,  they  are  the  victims  of  excessive 
competition.  In  proportion  to  our  population, 
we  have  from  four  to  six  times  as  many  miles  of 
railroad  as  any  European  state.  The  charges 
for  transportation  on  the  foreign  railways  are 
generally  at  least  one  half  more  than  in  this  coun- 
try, and  frequently  double-  what  they  are  here. 
At  the  same  time,  the  wages  paid  are  probably 
little  more,  on  the  average,  than  half  what  are 
paid  by  our  roads. 

Under  such  circumstances  it  is  evident  that 
investors  in  American  railroads  can  hardly  ex- 
pect the  ordinary  rate  of  profit.  Too  much  rail- 
road has  been  built  for  the  business  to  be  done. 
The  legislatures,  it  is  true,  have  prescribed  low 
rates,  but  the  railroad  managers,  in  their  fierce 
competition  for  traffic,  had  set  them  the  exam- 
ple. We  are  not  at  present  concerned  to  deter- 
mine what*  was  required  by  justice  under  such 
conditions,  but  wc  can  not  fail  to  be  struck  with 


CORPORATIONS    POSSESSING    MONOPOLIES.       HJ 

the  severity  of  the  check  which  competition  ex- 
ercises on  monopoly.  It  may  be  laid  down  as  a 
general  rule  that  if  the  profits  of  a  natural  mo- 
nopoly are  very  excessive,  they  will  be  of  brief 
duration.  The  amount  of  capital  ready  for  in- 
vestment in  new  enterprises  is  now  so  great  as 
to  be  a  constant  menace  to  the  profits  of  those 
already  established.  The  progress  of  invention 
is  so  rapid,  and  the  improvement  and  economies 
of  production  are  so  extensive,  as  to  make  ex- 
isting machinery  continually  obsolete.  It  fol- 
lows from  this  that  in  considering  whether  the 
profits  of  any  enterprise  are  excessive,  we  must 
take  into  view  their  probable  duration.  In  many 
cases  we  shall  find  that  after  a  short  period  of 
large  profits  the  enterprise  has  ceased  to  make 
any  at  all,  and  has  finally  been  abandoned,  at  the 
loss  of  nearly  the  whole  capital  invested.  ^Vhile 
this  result  seldom  takes  place  with  a  railroad, 
nothing  is  more  common  than  for  the  original 
stockholders  to  lose  all  their  investment,  or  to 
have  their  profits  cut  down  to  a  very  insignifi- 
cant figure.  Hence  it  seems  reasonable  that 
those  who  are  willing  to  assume  the  risk  of  in- 
vesting their  wealth  in  such  a  way  as  to  be  inex- 
tricable— of  transforming  it  into  embankments 
and  tunnels  and  bridges  and  excavations,  which 
are  essentially  permanent  and  admit  of  no  re- 


llS  INDUSTRIAI-    I'RKKDOM. 

transformation — that  sucli  investors  should  be  al- 
lowed to  receive  sufficient  profits  to  insure  them 
ai^'ainst  their  prospective  losses. 

The  elevated  railway  in  the  city  of  Xew  York 
affords  a  very  striking'  illustration  of  these  prin- 
ciples. This  railway  is  a  favourite  subject  of  de- 
nunciation as  a  monopoly  by  some  of  the  writers 
for  the  newspaper  press,  because  it  pays  perhaps 
nearly  double  the  ordinary  rate  of  interest  on  the 
capital  actually  devoted  to  its  construction. 
These  writers  seem  to  ignore  the  difficulties  that 
attended  the  inception  of  this  enterprise.  It  was 
in  the  first  place  a  comi)lete  failure,  and  those 
who  had  put  their  money  in  it  were  ridiculed  for 
their  folly.  Certainly  no  prudent  investor  would 
have  had  anything  to  do  with  it  if  he  had  been 
told  that  he  should  receive  in  case  of  success 
only  the  ordinary  rate  of  interest,  while  he  must 
assume  the  whole  risk  of  loss.  Considering  the 
novelty  of  the  enterprise,  the  violent  opposition 
that  it  was  sure  to  encounter,  and  the  legal  diffi- 
culties that  were  to  be  expected,  twice  the  or- 
dinary rate  of  interest  might  very  well  have  been 
regarded  as  an  insufficient  inducement  to  venture 
into  it. 

Although  this  rate  of  compensation  was  per- 
haps as  much  as  was  just,  in  view  of  the  risk 
originally  incurred  in  this  enterprise,  it  may  be 


CORPORATIONS    POSSESSING    MONOPOLIES.       1 19 

argued  that  it  is  altogether  inadequate  if  we  con- 
sider the  perils  of  its  future.  Its  profits  have 
been  already  much  reduced  by  the  competition 
of  surface  cars  propelled  by  cables,  and  if  the  city 
of  New  York  should  construct  an  additional  sys- 
tem of  rapid  transit  the  elevated  railway  might 
not  be  able  to  earn  its  operating  expenses.  In 
view  of  this  contingency,  it  seems  impossible  to 
deny  the  justice  of  the  profits  made  by  the  road. 
Such  profits  must  be  regarded  at  present  largely 
as  a  sinking  or  insurance  fund.  They  may  even- 
tually prove  to  be  no  more  than  sufficient  to 
replace  the  original  investment  after  allowing  the 
ordinary  rate  of  interest.  Should  they  prove  to 
be  more  than  enough  for  this,  they  may  yet  not 
exceed  a  fair  compensation  for  the  uneasiness 
and  apprehension  attending  such  an  investment; 
for  men  demand  compensation  in  the  rate  of 
profit  for  the  dread  of  loss,  even  if  it  does  not 
actually  occur.  Unless  they  are  to  be  recom- 
pensed for  their  anxiety  concerning  precarious 
investments,  they  will  certainly  confine  them- 
selves to  those  which  are  free  from  risk — which 
is  but  another  way  of  saying  that  no  speculative 
ventures  will  be  undertaken  unless  the  public  is 
willing  to  recognise  the  justice  of  exceptionally 
great  returns.  At  least  it  w^ould  be  true  that 
if  the  public  really  refused  to  take  that  position, 
9 


I20  INDUSTRIAL    FRKEDOM. 

speculative  ventures  would  become  on  that  ac- 
count nil  the  more  speculative.  They  would 
nrrd  the  prospect  of  very  j^reat  profits  to  make 
them  attractive,  and  would  therefore  tend  all  the 
more  to  fall  into  the  hands  of  reckless  and  un- 
scrupulous men.  The  example  of  the  Brooklyn 
elevated  roads,  which  have  been  nearly  ruined 
by  the  competition  arising  from  the  use  of  elec- 
tric motors  by  the  surface  lines,  is  extremely 
instructive   upon   these  points. 

i'.nt  whatever  doubts  may  be  entertained  con- 
ccrnitii;  the  monopoly  supposed  to  be  enjoyed 
by  the  elevated  railway,  there  can  be  no  question 
about  the  efTect  of  this  railway  in  increasing  the 
monopoly  enjoyed  by  landlords.  The  immediate 
efTect  of  the  building  of  this  road  was  to  make 
a  very  large  tract  of  land  in  the  city  of  New 
York  available  for  residences.  This  land,  owing 
to  its  inaccessibility,  had  previously  possessed  lit- 
tle value;  but  so  soon  as  it  was  reached  by  the 
railway  its  price  advanced  at  a  prodigious  rate,  and 
has  since  been  maintained  at  a  very  high  figure. 
The  owners  of  this  land,  therefore,  found  them- 
selves at  once  very  greatly  enriched  by  the  opera- 
tion of  a  cause  with  which  they  had  no  connection. 
Without  the  least  efTort  on  their  part  they  found 
their  land  suddenly  worth  twice  or  thrice,  or  even 
four  times,  what  it  had  been  worth  before. 


CORPORATIONS    POSSESSING    MONOPOLIES.       121 

The  public,  however,  hears  very  little  con- 
cerning the  injustice  of  this  monopolistic  gain, 
although  it  is  from  every  point  of  view  more  re- 
markable than  that  of  the  elevated  railway.  The 
owners  of  the  land  affected  certainly  made  much 
greater  profits  than  the  men  who  constructed 
the  road,  and  they  made  them,  too,  without  any 
risk  to  themselves.  Nor  do  they  suffer  any  ap- 
prehension concerning  the  loss  of  these  profits 
in  the  future.  Should  the  elevated  railway  be 
hereafter  unable  to  continue  its  service,  it  will 
only  be  because  some  more  convenient  method 
of  travel  has  taken  its  place.  Whatever  may 
happen,  therefore,  the  owners  of  these  lands  are 
not  likely  to  be  unfavourably  affected.  They 
seem  thus  to  occupy  the  fortunate  position  of 
enjoying  the  advantages  of  a  lucrative  and  per- 
manent monopoly,  without  any  effort,  or  ex- 
pense, or  risk  on  their  part,  while  the  elevated 
railway  secured  its  uncertain  privileges  at  great 
cost  and  maintains  them  with  great  difficulty. 
In  this  case  the  corporation,  which  was  really 
the  means  of  conferring  an  enormous  benefit  on 
the  public  as  well  as  the  landlords,  encounters 
the  greatest  odium  for  making  profits  that  can 
not  be  called,  on  the  whole,  immoderate;  while 
private  persons,  reaping  where  others  sowed,  en- 
joy their  gains  without  reproach. 


122  INDUSTRIAL    I  KIKDnM. 

It  may  he  .'kMcmI  that  some  of  these  persons 
wt-rr  only  prcs  c-iittd  hy  a  slraiiic<l  decision  lA  the 
("oiiit  of  Appeals  from  j;ctlinj;  damages  from  the 
elevated  roads  for  the  dilTerence  hetween  the  value 
of  their  property  and  the  value  which  it  wcnild 
have  had  if  the  road  had  heen  of)erated  in  a  purely 
henelkial  way — i.  e.,  without  any  detrimental  in- 
lluences.  Jt  is  hard  to  resist  the  conclusion  that 
the  monopoly  enjoyed  by  these  landlords  is  quite 
as  unjust  as  that  of  the  railroads;  in  which  case 
the  employees  of  the  railroads  have  certainly  no 
better  claim  to  higher  wages  than  the  employees 
of  the  private  persons  whom  the  railroads  have 
incidentally  enriched. 


CHAPTER  IX. 

THE    PARTNERSHIP    THEORY. 

Moved  with  a  desire  to  mitigate  the  loss  and 
suffering  occasioned  by  controversies  between 
employers  and  workmen,  philanthropists  have  la- 
boured to  develop  systems  of  co-operation  and 
profit  sharing.  The  theory  of  these  systems  is 
that  the  employers  and  labourers  engaged  in  a 
particular  enterprise  are  jointly  interested  in  mak- 
ing it  productive.  They  are  practically  in  part- 
nership, and  some  better  method  of  dividing  the 
profits  than  the  higgling  of  the  market  ought 
to  prevail.  There  is  so  much  friction  in  bar- 
gaining about  wages,  so  much  time  lost  in  strikes, 
and  so  much  waste  and  damage  from  mutual 
hatred  and  jealousy,  where  there  should  be  peace 
and  concord,  that  these  projects  for  industrial 
partnership  have  been  eagerly  welcomed,  and 
have  in  some  instances  attained  a  degree  of  suc- 
cess, although  not  the  degree  hoped  for  by  their 
advocates.  That  they  have  attained  no  greater 
success  appears  to  have  been  due  to  a  misunder- 
standing of  the  partnership  relation. 

123 


124  INDUSTRIAL    FREEDOM. 

The  cssciUial  features  of  a  partnershij)  arc 
joint  ownersliip  of  profits  and  individual  liability 
fur  jiartiiersliii)  ohlij^ations.  These  arc  the  fea- 
tures recognised  by  the  law,  and  they  imply,  as 
a  rule,  that  the  compensation  of  the  partners 
is  to  be  paid  out  of  accruing  profits.  This  also 
implies  that  cipital  is  contribuied  to  the  firm 
by  its  members,  or,  at  least,  that  capital  is  pos- 
sessed by  those  who  do  not  contribute  any.  It 
is  not  uncommon  for  partnership  agreements  to 
provide  that  one  member  shall  put  in  not  money, 
but  skill  and  labour.  I'ut  such  a  partner  has  to 
live  during  the  period  which  must  elapse  before 
the  profits  of  the  enterprise  are  realized;  he  must 
live  even  if  there  are  never  any  profits  realized. 
Tiie  sum  that  he  consumes  for  this  purpose, 
whether  he  owns  it  or  borrows  it,  is  really  in- 
vested in  the  partnership.  If  he  were  not  en- 
gaged in  the  partnership  he  would  have  this 
sum  to  invest  elsewhere. 

Sometimes  a  partner  is  admitted  under  an 
agreement  that  he  shall  not  only  contribute  no 
money,  but  shall  also  draw  a  regular  sum  from 
the  start.  But  such  a  partner  is  generally  in  pos- 
session of  special  skill,  or  some  kind  of  advan- 
tage which  is  worth  paying  for.  and  which  is 
therefore  practically  capital.  He  is  probably  a 
successful  manager,  or  can  procure  customers,  or 


THE    PARTNERSHIP    THEORY.  12$ 

has  technical  training  or  knowledge.  Something 
of  the  kind  he  must  have,  or  there  would  be  no 
motive  for  promising  him  a  part  of  the  profits 
in  addition  to  compensation  for  his  labour.  If 
this  compensation  is  the  full  value  of  his  service, 
why  should  he  participate  in  the  profit?  If  it 
is  less  than  his  service  is  worth,  then  he  con- 
tributes to  the  partnership  a  capital  measured  by 
the  difference. 

Whenever  two  or  more  labourers  combine  to 
produce  or  distribute  goods  they  necessarily  em- 
ploy some  capital.  They  must  own  some  tools 
and  appHances,  they  must  rent  a  place  of  busi- 
ness, or  a  workshop,  and  purchase  some  mate- 
rials; and  it  makes  no  difference  whether  this  is 
done  with  their  own  or  with  borrowed  capital. 
Whether  owned  or  borrowed,  the  capital  must 
belong  practically  to  the  participants  in  the  en- 
terprise, and  so  long  as  this  is  true  a  real  part- 
nership exists  among  them.  Some  of  the  first 
English  co-operative  stores  were  partnerships;  a 
few  men  made  up  a  joint  fund,  contributed  their 
own  labour,  and  divided  the  profits.  But  most 
of  these  stores  have  long  ceased  to  maintain 
this  relation.  They  hire  their  employees  for 
wages,  just  like  other  concerns,  and  do  not  share 
their  profits  with  them.  If  the  title  "  co-opera- 
tive "  implies  division  of  profits  between  employ- 


126  INDUSTRIAL    FRKEDOM. 

crs  and  cMiiploycd,  these  English  concerns  have 
no  rij^lil  to  the  title.  And  there  are  very  few 
concerns  anywhere  that  have  a  rij^ht  to  it. 

There  are  many  reasons  why  this  should  be  so, 
one  of  whicli,  however,  is  (|uite  sufficient  to  pro- 
(hice  the  effect.  The  day  for  the  most  effective 
einploynunt  of  small  capitals  is  past,  and  it  can 
not  return  while  the  rate  of  profit  is  so  low  as 
it  is  at  present.  The  possessors  of  small  capi- 
tals must  aggregate  their  funds;  but  in  the  case 
of  labourers,  their  individual  funds  are  so  small 
that  it  takes  a  great  many  of  them  to  make  an 
elTective  aggregate.  Now  there  can  not  be  a 
partnership  with  a  great  many  partners;  it  will 
not  work.  There  are  too  many  men  to  be  con- 
sulted and  too  many  chances  for  differences  of 
opinion.  Even  when  there  are  not  more  than 
three  or  four  partners  there  has  to  be  some  spe- 
cialization; one  of  them  has  sole  charge  of  one 
])ranch  of  the  business,  and  one  of  another.  The 
greater  the  number  of  partners  the  greater  the 
chance  of  death;  and  if  one  of  the  partners 
dies  it  often  makes  a  great  deal  of  trouble.  It 
dissolves  the  partnership  and  brings  in  the  law- 
yers, and  it  may  end  the  business.  Hence  part- 
nerships constantly  give  place  to  corporations; 
but  the  stockholders  in  a  corporation  are  not 
partners.     They  can  elect  a  committee  to  carry 


THE  PARTNERSHIP  THEORY.         12/ 

on  their  business,  but  they  can  not  carry  it  on 
themselves.  They  can  not  even  control  their 
committee,  the  trustees  or  directors,  as  they  are 
called,  except  within  narrow  Hmits;  they  can 
only  turn  them  out  at  the  end  of  their  term  of 
office  and  replace  them  with  others.  Nor  can 
they  withdraw  their  capital,  unless  they  can  find 
some  one  to  buy  their  stock;  the  capital  belongs 
to  the  corporation,  and  continues  to  belong  to  it 
until  it  is  dissolved.  On  the  other  hand,  the 
stockholders'  liability  is  limited.  They  may  lose 
what  they  have  invested  in  the  corporation,  but 
they  can  not  be  held  for  its  debts. 

It  may  be  said  that  these  distinctions  are  im- 
material; that  labourers  may  participate  in 
profits  whether  they  are  called  stockholders  or 
partners.  No  doubt,  where  labourers  are  em- 
ployed by  a  corporation,  they  are  at  liberty  to 
buy  shares  of  its  stock,  and  the  managers  of  most 
corporations  would  be  very  glad  to  have  them 
do  so.  But  they  would  participate  in  profits  on 
the  same  basis  as  other  investors  of  capital.  Un- 
less they  owned  a  major  part  of  the  stock  they 
could  exercise  no  control  of  the  management  of 
the  business;  and  it  could  seldom  happen  that 
they,  would  own  a  controlling  interest.  Were 
they  able  to  do  so,  they  would  generally  have 
been  graduated  from  the  class  of  labourers  into 


128  INDUSTRIAL    FRKKDOM. 

that  (»f  capitalists.  They  woulrl  not  know 
whflhiT  it  would  l)c  most  to  their  interest  to 
lower  wages  or  raise  them;  it  would  be  like  taking 
money  out  of  one  pocket  and  putting  it  into  the 
other.  Indeed,  the  most  extreme  confusion 
would  l)c  introduced  into  our  clas.sifications. 
There  would  be  a  majority  of  labourers  who  were 
also  employers  and  capitalists,  employing  a  mi- 
nority who  were  neither,  and  who,  of  course, 
would  not  participate  in  the  profits. 

It  is  true  that  a  number  of  labourers  might 
iorm  a  joint-stock  company  and  employ  only 
themselves.  Being  both  labourers  and  capital- 
ists, they  would  get  the  whole  product,  whether 
it  were  called  wages  or  profits.  T.ut  the  fact 
that  little  has  been  done  in  this  direction  in- 
dicates that  it  results  in  no  economic  gain.  La- 
bourers have  generally  found  that  they  fared 
better  if  their  wages  were  paid  out  of  other 
people's  capital  than  out  of  their  own.  They 
have  seldom  been  able  to  secure  the  prudent  and 
sagacious  management  that  is  essential  to  busi- 
ness success,  and  they  have  lost  more  than  they 
have  gained  by  most  of  their  attempts  at  co- 
operation. It  is  probable  that  the  difficulty  of 
maintaining  proper  subordination  will  always  be 
fatal.  The  men  will  feel  that  it  is  their  own 
property  that  is  dealt  with,  and  they  will  be  un- 


THE   PARTNERSHIP   THEORY.  1 29 

der  continual  temptation  to  interfere  with  the 
management.  The  managers,  being  under  con- 
stant supervision  and  criticism,  will  be  timid. 
They  will  want  to  satisfy  the  men,  and  they  will 
not  feel  disposed  to  insist  on  their  own  judg- 
ment when  the  men  are  opposed  to  it.  They 
will  not  be  able  to  reduce  wages  when  they  think 
them  too  high,  or  to  limit  production  when  they 
think  the  market  is  overstocked.  They  will  be 
like  the  Athenian  generals  who  had  to  fight  bat- 
tles under  the  supervision  of  a  committee  of  the 
citizens:  they  will  be  more  anxious  about  the 
movements  of  their  friends  than  of  their  enemies; 
they  will  look  backward  instead  of  forward. 

Some  profit-sharing  schemes  have  been  per- 
haps less  open  to  these  objections,  but  they  have 
encountered  many  difificulties.  In  these  schemes 
the  employers  have  agreed  to  pay  the  men  a  fixed 
rate  of  wages,  and  in  addition  a  "  bonus  "  out  of 
whatever  profits  were  made  beyond  a  certain  per 
cent  on  the  capital  stock.  The  theory  has  been 
that  in  this  way  the  men  would  be  led  to  take 
a  more  positive  interest  in  increasing  the  profits 
of  the  business,  and  that,  by  reason  of  their 
greater  industry  and  better  spirit,  these  profits 
would  be  materially  enhanced.  To  a  certain  ex- 
tent this  idea  has  been  realized,  but  not  to  an 
extent  sufficient  to  encourage  us  to  believe  that 


130  INDt'STklAI.    FREEDOM. 

its  fiiUirc  is  hri^^lit  with  j)r()iiiisc.  The  additional 
pnxhiclioii  docs  not  appear  to  he  lar^c  enouj^h 
to  allow  of  a  (hvidend  of  any  j^reat  size,  and  it 
has  not  hecn  found  practicahlc  to  determine  how 
far  increased  profits  were  due  to  better  service 
on  the  part  of  the  men,  and  how  far  to  other 
causes.  When  tlie  introduction  of  the  plan  has 
occurred  at  the  hcpinniuf^  of  a  period  of  j^eneral 
prosperity,  the  men  have  been  naturally  inclined 
to  refer  increased  profits  to  their  own  greater 
exertions,  and  to  think  that  their  bonus  was  in- 
sufficient, while  the  masters  have  laid  stress  on 
the  potency  of  other  causes.  On  the  other 
hand,  when  profits  have  fallen  off  and  there  is  no 
bonus,  the  men  arc  apt  to  reason  that  they  are 
rendering  greater  service  and  getting  only  or- 
dinary wages.  Such  misunderstandings  may  be 
removed,  but  at  an  expenditure  of  time  and  pa- 
tience incommensurate  with  the  gain. 

For  we  must  bear  it  constantly  in  mind  that 
prosperity  comes  by  fits  and  starts.  Xo  concern 
can  regularly  pay  out  all  the  profits  of  each  year 
in  the  shape  of  dividends  or  bonus.  There  will 
come  lean  years,  and  successions  of  lean  years, 
and  a  surplus  is  extremely  important  as  a  pro- 
tection against  many  disastrous  possibilities. 
There  come  times  when  almost  every  concern 
needs   to   borrow   and   when   every   one   is   cau- 


THE  PARTNERSHIP  THEORY.        I3I 

tious  about  lending.  The  company  that  has 
a  surplus  has  money  offered  to  it  on  its  own 
terms.  The  company  that  has  no  surplus  must 
pay  high  rates  and  furnish  security;  it  may  not  be 
able  to  get  money  on  any  terms.  But  these  con- 
siderations are  not  easily  explained  to  a  mass  of 
imperfectly  educated  labourers.  They  are  con- 
siderations which  a  great  many  of  their  employ- 
ers do  not  sufficiently  attend  to,  although  the 
consequences  of  neglecting  them  may  be  ruinous. 
Even  where  the  managers  of  a  business  are  dis- 
posed to  maintain  a  surplus  they  are  liable  to 
be  thwarted  by  their  stockholders,  who  are 
clamorous  for  dividends;  and  their  employees 
would  be  even  more  difficult  to  pacify.  In  short, 
the  bickerings  over  wages  with  which  we  are 
now  plagued  would  be  stayed  only  to  give  place 
to  disputes  about  dividends.  Unless  work- 
men cease  to  regard  their  masters  with  sus- 
picion and  come  to  trust  both  their  honesty 
and  their  ability,  they  will  be,  and  they  have 
been  found  to  be,  dissatisfied  with  their  masters' 
management  of  profit-sharing  enterprises,  while 
incompetent  to  improve  upon  it. 

It  is  evident  that  such  schemes  have  little 
to  recommend  them  unless  it  be  assumed  that 
they  cause  the  labourers  to  become  more  effi- 
cient  without   increasing   their   sacrifices.      We 


132  INDUSTRIAL    FKnF.POM. 

iinist  hold  that  if  they  iiu-rt-ascwl  their  toil  they 
wtiiild  j^a't  hi^dicr  vva^es  uikIct  the  onhnary  sys- 
tiiii  (if  coinptMisation,  and  the  system  of  profit 
shariii}^^  wouhl  only  be  a  cumbrous  mode  of  pay- 
in}^  the  increase.  lUit  it  is  (|uile  doubtful  if  it 
is  desirable  that  labourers  should  work  harder 
than  thiy  do  now.  Philanthropists  are  inclined 
to  favour  shortcninj^  rather  than  lenj^theninj:^  the 
hours  of  labour.  The  strain  of  steady  work  un- 
der the  stimulus  of  incessant  machinery  is  now 
frc(iiicntly  more  severe  than  is  wholesome. 
Some  workmen  arc  inclined  to  shirk,  and  under 
a  proflt-sharintj^  system  their  fellows  would,  it  has 
been  supposed,  compel  them  to  work  more  stead- 
ily; but  the  possible  ^ain  has  been  found  to  be 
hardly  sufficient  to  induce  men  to  undertake  this 
invidious  ofTice.  The  fellow-feeling  of  workmen 
is  too  inveterate  to  give  place  so  easily  to  the 
sentiments  natural  to  employers;  nor  are  the  lazy 
j)rone  to  become  industrious  for  any  slight  stim- 
ulus. There  is,  it  is  true,  a  possible  saving  from 
the  mere  improvement  in  the  attitude  of  the 
men;  they  can  make  a  considerable  ditTcrence 
in  the  outgo,  if  they  choose,  without  doing  any 
more  work.  Whatever  can  be  saved  in  this  way 
is  pure  gain  from  every  point  of  view;  but,  after 
all,  good  workmen  generally  mean  to  give  a  fair 
day's  work  for  a  fair  day's  wages,  and  in  a  well- 


THE  PARTNERSHIP  THEORY.        133 

conducted  business  employers  know  how  much 
ought  to  be  accomplished  for  a  given  expenditure 
of  labour  and  material.  We  should  not  unduly 
minimize  the  desirability  of  promoting  the  feel- 
ings of  loyalty  and  fidelity  among  workmen;  but 
the  experiments  with  profit  sharing  as  a  motive, 
in  spite  of  some  notable  successes,  have  been 
hitherto  disappointing. 

If  there  is  no  considerable  margin  of  this 
kind  for  saving,  it  is  doubtful  if  profit-sharing 
schemes  will  ever  be  successful.  The  difficulty 
of  operating  them  would  outweigh  their  benefits. 
In  most  cases  there  would  properly  be  no  surplus 
profits  to  divide.  The  exceptional  gains  of  good 
years  would  be  no  more  than  enough  to  balance 
the  exceptional  losses  of  bad  years.  A  concern 
that  distributed  all  such  gains  as  dividends,  either 
to  labourers  or  stockholders,  would,  as  we  have 
seen,  in  most  cases  become  involved.  On  the 
other  hand,  a  concern  that  accumulates  its  profits 
really  insures  steady  wages  to  its  labourers.  When 
other  concerns  are  obliged  to  close  their  works 
and  discharge  their  workmen,  this  concern  can 
go  on  piling  up  goods,  for  which  there  is  no 
present  market,  rather  than  interrupt  the  con- 
tinuity of  its  business.  Its  workmen  thus  receive 
somewhat  more  than  ordinary  wages.  Their 
share  of  the  profits  of  good  years  is  held  for  them, 


134  INDUSTRIAL    FRMKDOM. 

;iinl  jiaifl  to  tluiii  in  bad  years,  in  the  shape  of 
waf^cs  wliiili  tluir  l;il)()iir  would  not  elsewhere 
command.  If  there  is  any  reduction  of  force  at 
such  times,  it  is  the  undcscrvinj^  that  j^o  first. 
Really  faithful  and  industrious  men  are  only  dis- 
charj^ed  in  the  last  extremity,  and  their  reten- 
tion is  a  further  means  of  giving  them  a  share 
in  past  profits.  Thus  a  wise  accumulation  hy 
the  managers  of  an  enterprise  practically  in- 
creases the  compensation  of  the  labourers  en- 
gaged in  it  by  giving  them  work  when  labourers 
elsewhere  arc  idle,  and  by  rewarding  the  best 
among  them  for  their  former  fidelity. 

There  is,  however,  a  fundamental  objection 
to  the  theory  that  the  labourers  in  any  particu- 
lar enterprise  are.  or  should  be.  in  partnership 
with  their  employers.  It  is  essential  to  the  part- 
nership idea  that  losses  are  to  be  shared  as  well 
as  profits,  and  we  are  not  at  liberty  to  assume 
that  it  is  for  the  best  interests  of  the  labourers 
that  tills  idea  should  be  realized.  Tf  we  review 
the  history  of  manufactures  and  trade  in  any 
community,  we  can  not  fail  to  be  appalled  at  the 
number  of  failures  which  have  occurred.  It  may 
Mcll  be  doubted  if  the  average  duration  of  the 
prosperity  of  business  enterprises  is  equal  to  the 
average  duration  of  human  life.  The  graveyards 
of  these  enterprises  arc  not  so  conspicuous  as 


THE  PARTNERSHIP  THEORY.         135 

those  of  mankind,  although  the  spectacle  of 
abandoned  mills  and  crumbling  foundations  is 
sadly  common.  Yet  these  graveyards  exist  in 
the  reports  of  commercial  agencies  and  in 
the  records  of  the  courts  of  insolvency,  and  their 
extent  is  a  melancholy  commentary  on  the  limits 
of  business  sagacity.  A  shrewd  and  industrious 
man  builds  up  a  successful  undertaking,  and  it  is 
sometimes  so  fortunate  as  to  outlast  his  day. 
There  may  be  a  succession  of  able  managers  in 
a  business,  just  as  there  may  be  a  succession  of 
able  kings  in  a  government;  but  it  does  not 
often  happen.  Too  often  the  sons  of  a  capable 
business  man  are  incapable;  they  succeed  to  the 
control  when  everything  is  running  smoothly, 
and  they  have  never  learned  how  to  cope  with 
the  difificulties  which  their  father  surmounted, 
and  which  they  think,  if  they  think  at  all  about 
it,  will  never  recur.  But  they  will  recur.  The 
conditions  of  business  change  incessantly,  and 
in  these  days  of  rapid  invention  and  extended 
communication  they  often  change  violently. 
Unless  manufacturers  are  on  the  watch  for  the 
latest  improvements  in  machinery  they  suddenly 
find  that  more  alert  competitors  are  underselling 
them,  and  they  may  be  ruined  before  they 
know  it. 

The   fluctuations  in   the   prices   of  raw  ma- 


1}C)  INDl'STRIAI.    I  KKI.DO.M. 

tcrials  arc  very  ^rcat,  and  they  arc  exceedingly 
(lifriciili  to  prognosticate.  They  frctjuently  de- 
pend on  the  machinations  of  a  few  powerful  men; 
sometimes  on  the  will  of  one  very  |)fnverful  man. 
'riicrc  may  he  very  suhstantial  reasons  for  ex- 
Itictin}^^  l)riccs  to  advance,  and  the  manaj^er  of 
a  husiness  may  think  it  necessary  to  huy  larj^cly 
for  fear  he  may  have  to  pay  higher  prices  later 
on.  lUit  secret  or  unperceived  causes  may  be 
in  operation,  and  the  price  falls  instead  of  rising, 
and  thus  the  manager  who  thought  he  was  pru- 
dent, and  would  have  been  praised  for  his  sagac- 
ity by  every  one  had  the  issue  been  difTerent,  fnvls 
that  he  has  incurred  a  disastrous  loss,  and  is  de- 
nounced as  a  reckless  speculator. 

Sometimes  there  are  several  able  partners, 
and  they  all  make  fortunes.  Eventually  they 
die.  and  their  executors  or  trustees  come  into 
control  of  their  estates.  But  it  is  seldom  the 
case  that  they  can  continue  the  business  of  the 
decedents.  They  may  not  know  anything  about 
it,  and  if  they  try  to  retain  the  management 
they  are  very  likely  to  wreck  it.  If  they  employ 
the  right  men  the  business  may  continue  to  suc- 
ceed; but  they  frequently  find  out  that  they  have 
not  employed  the  right  men,  and  then  it  is  too 
late  to  extricate  themselves. 

There  are  reasons,  which   I   need  not  dwell 


THE  PARTNERSHIP  THEORY.         13/ 

upon,  why  corporations  may  endure  longer  than 
private  enterprises.  The  old  directors  may  be 
sagacious  enough  to  recognise  that  there  must 
be  a  constant  infusion  of  new  blood  if  the  vitality 
of  the  concern  is  to  be  kept  up,  and  may  take 
care  to  fill  up  their  board  with  young  men  of 
proved  capacity.  But  if  they  neglect  this  there 
is  great  probability  of  trouble.  The  business 
gets  into  a  rut,  and  those  who  are  really  most 
interested  in  it  can  not  do  anything  to  make 
things  better.  They  can  not  take  any  active 
part  in  the  management,  because  they  do  not 
understand  it,  and  they  have  to  employ  mana- 
gers who  are  interested  only  to  the  extent  of 
their  salaries.  Gradually  the  profits  diminish, 
and  the  surplus  disappears.  Then  resort  is  had 
to  borrowing,  and  so  long  as  business  is  good 
there  may  be  a  little  spurt  under  the  influence 
of  this  stimulus.  But  when  bad  times  come 
credit  is  restricted,  and  the  charges  for  interest 
are  not  earned  and  can  not  be  met.  Then 
comes  the  discovery  of  the  dry  rot,  and  the 
stockholders  wake  up  to  the  knowledge  that 
their  investment  has  disappeared. 

The  moral  of  this  is  plain  enough.  As  we 
observed  before,  wise  people  do  not  put  all  their 
eggs  in  one  basket.  Unless  they  are  personally 
familiar  with  the  manner  in  which  an  enterprise 


138  INDUSTRIAL    I'RKF.DDM. 

is  inannj^cd,  they  arc  careful  not  to  have  in  it 
more  money  than  they  can  afford  to  lose.  They 
scatter  I  heir  investments,  and  when  they  observe 
si^Mis  of  had  nianafi;ement  and  decay  in  any 
concern  they  withdraw  from  it  betimes.  But 
or(Hnary  hibourers  are  entirely  incapable  of  the 
exercise  of  such  discretion.  They  have  no  idea 
of  the  extent  of  tlicir  employers'  obligations; 
they  undoubtedly,  as  a  class,  exaggerate  their 
employers'  resources.  In  the  case  of  corpora- 
tions especially,  many  workmen  apparently 
suppose  that  the  wages  paid  are  fixed  by  the  arbi- 
trary volition  of  the  managers.  They  may  grad- 
ually become  aware  of  the  fact  that  their  employ- 
ers are  short  of  money,  and  the  more  astute 
among  them  may  suspect  the  possibility  of  a  col- 
lapse before  it  occurs;  but  by  the  time  they 
become  suspicious  affairs  are  likely  to  be  in  such 
a  state  that  no  one  who  has  any  money  in  the 
business  can  get  it  out.  He  can  not  "  unload  " 
on  any  one.  because  every  one  knows  what  is 
likely  to  happen. 

Hence  we  may  lay  it  down  almost  as  a  car- 
dinal rule  that  it  is  not  prudent  for  a  labourer 
to  invest  all  his  savings  in  the  business  of  his 
employer.  A  portion  of  them  may  perhaps  be 
so  invested,  provided  the  conditions  are  made 
such  that  it  can  be  withdrawn,  or  that  it  can 


THE    PARTNERSHIP    THEORY.  139 

be  secured  by  some  kind  of  preference  in  the  pay- 
ment of  debts;  but,  as  a  general  rule,  experi- 
ence indicates  that  labourers  fare  best  either 
when  they  employ  their  earnings  in  some  invest- 
ment that  is  under  their  own  control,  such  as 
land,  or  when  they  scatter  them  in  a  number  of 
investments.  This  is  practically  what  is  done 
when  they  deposit  them  in  the  savings  banks; 
for  it  is  an  elementary  maxim  in  the  management 
of  these  institutions  that  the  amount  of  their 
funds  invested  in  any  single  security  or  class  of 
securities  should  be  small.  In  nearly  every  case 
where  these  banks  have  failed  in  recent  years  it 
has  been  due  to  a  disregard  of  this  principle. 
The  gratifying  fact  that  these  failures  have  been 
so  few  is  in  like  manner  explained  by  its  ob- 
servance. 

It  is  of  vital  importance  to  keep  in  mind  the 
fact  that  profits  are  the  result  of  the  previous 
expenditure  of  wages.  Wages  are  paid  out  of 
wealth  already  existing;  profits  are  to  be  made 
out  of  wealth  created  by  spending  pre-existing 
wealth.  Were  it  otherwise,  were  labourers  re- 
munerated out  of  the  things  they  are  at  any  given 
time  producing,  they  would  not  need  to  hire 
out.  The  ploughman  necessarily  consumes  his 
daily  bread;  but  it  is  made  of  the  wheat  that 
grew  last  year,  not  of  that  which  is  expected 


I40  INDUSTRFAI,    IK  IlI.DONf . 

to  prow  ill  the  ficM  tliat  he  is  plouphinp.  There 
may  luvtr  ho  any  wheat  there;  frost,  or  flood, 
or  hhj^ht,  or  accident,  may  annihihite  it  before 
the  time  of  harvest.  Nevertheless  he  is  suppHcd 
with  bread;  it  is  advanced  out  of  capital  with 
the  hope  that  it  will  be  more  than  repaid  in  the 
future.  The  recompense  of  the  labourer  is  as- 
sured; that  of  the  emjjloycr  is  contingent.  Since 
the  labourer  does  not  share  losses,  he  is  not  in 
partnership  with  his  employer,  and  the  employ- 
er's profits  must  be  sufTicient  to  insure  him 
ai^ainst  the  risk  of  loss  which  he  must  bear 
alone. 

While  labourers  and  employers  are  not  part- 
ners in  the  ordinary  sense,  they  are  in  a  larger 
sense.  They  arc  interested  primarily  in  the  par- 
ticular enterprise  that  brings  them  together;  but 
they  are  more  interested  in  the  general  welfare. 
If  the  community  at  large  is  not  prosperous,  in- 
di\idua]  enterprises  will  be  generally  unprosper- 
ous.  Hence  the  labourers  and  employers  of  the 
whole  country  are  in  a  kind  of  universal  partner- 
ship, in  which  all  that  they  have  is  invested.  In 
the  interest  of  both  classes  this  truth  deser\'es  to 
be  emphasized.  Our  legislators  are  continually 
engaged  with  schemes  intended  to  benefit  this 
interest  or  that  at  the  expense  of  the  whole  body 
of  citizens.     As  a  general  thing  the  representa- 


THE  PARTNERSHIP  THEORY.         I4I 

lives  of  one  class  are  ready  to  combine  with  those 
of  other  classes,  sacrificing  something  with  the 
hope  of  gaining  more.  But  this  selfish  policy 
often  overreaches  itself.  Such  burdens  are  as- 
sumed by  those  who  secure  favours  that  their 
success  proves  disappointing.  The  general  bur- 
den laid  on  society  hampers  and  impoverishes  it, 
and  every  branch  of  business  suffers,  because 
some  have  endeavoured  to  thrive  at  the  expense 
of  the  rest. 

The  French  Revolution  was  the  result  of  such 
a  policy  as  this,  carried  to  an  extreme  and  long 
persisted  in.  Every  one  tried  to  secure  some 
special  favour  or  immunity,  and  eventually  the 
whole  framework  of  society  collapsed  under  the 
weight  of  its  own  materials.  All  genuine 
progress  in  government  has  been  attained  by 
reversing  this  policy.  Reformers  have  insisted 
that  if  special  favours  granted  by  Government 
were  withdrawn  there  would  be  such  a  stimulus 
to  the  general  prosperity  that  the  special  inter- 
ests would  gain  more  than  they  lost;  and  so  it 
has  proved.  The  classical  instance  of  this  is,  of 
course,  the  repeal  of  the  corn  laws  in  England, 
which  the  landlords  declared  and  believed  would 
be  their  ruin,  but  which  actually  increased  their 
wealth  to  an  extent  which  astonished  not  only 
them  but  everybody  else. 


l.\2  INDUSTRIAL    FKKKUOM. 

Ill  a  cnuiifry  governed  hy  universal  sufTragc 
it  is  peculiarly  important  that  the  community 
of  interests  of  all  classes  should  he  recognised. 
Since  the  class  of  labourers  is  the  largest  of  all, 
it  would  be  in  their  power,  if  they  could  learn 
to  act  in  combination,  to  adopt  measures  in- 
tended to  benefit  thcni  as  a  class  at  the  expense 
of  other  classes.  Demagogues  are  constantly 
advertising  measures  purporting  to  be  of  this 
character,  and  the  timidity  of  legislators  permits 
many  of  them  to  become  laws.  But  we  are  quite 
warranted  by  experience  in  asserting  that  if  la- 
bourers were  to  unite  in  support  of  such  a  policy 
they  would  do  themselves,  as  well  as  the  coun- 
try, great  injury.  They  would  not  be  very  likely 
to  succeed  in  devising  a  practicable  scheme  in 
harmony  with  this  policy;  but  the  policy  itself 
is  essentially  pernicious.  No  great  reform  has 
ever  been  accomplished  by  granting  favours  to 
a  class,  because  the  motive  for  asking  such  fa- 
vours is  essentially  evil  and  selfish.  On  the  con- 
trary, all  great  refomis  have  consisted  in  the 
revocation  of  privileges  enjoyed  by  particular 
classes,  and  they  have  owed  their  success  to  the 
generous  and  unselfish  feelings  to  which  they  ap- 
pealed. It  is  to  face  in  the  wrong  direction  for 
labourers  to  demand  the  creation  of  privileges 
rather  than  their  abolition;  to  insist  on  class  leg- 


THE    PARTNERSHIP    THEORY.  I43 

islation  instead  of  legislation  for  the  general  wel- 
fare. 

Paradoxical  as  it  may  sound,  we  may  lay 
down  the  principle  that  it  is  easier  for  the  com- 
mon people  to  judge  what  is  for  the  welfare  of 
the  community  in  general  than  what  is  required 
for  the  prosperity  of  the  particular  industries  in 
which  they  are  engaged.  They  are  quite  com- 
petent to  decide  whether  it  is  more  advantageous 
to  have  the  friendship  of  a  kindred  people,  with 
whom  our  relations  of  every  sort  are  of  the  most 
intimate  kind,  and  with  whom  we  have  a  trade 
of  a  thousand  millions  a  year,  or  to  have  that  of 
an  alien  people,  whom  most  of  us  know  nothing 
about,  with  whom  we  have  scarcely  any  connec- 
tion, and  whose  commerce  is  insignificant.  They 
are  equally  competent  to  decide  whether,  in  view 
of  the  manner  in  which  public  money  is  spent,  it 
is  wiser  to  increase  expenditure  and  taxation  or 
to  reduce  them.  Nor  are  they  less  competent 
to  decide  whether  the  general  welfare  will  be  pro- 
moted by  legislation  that  frightens  those  who 
possess  capital  and  leads  them  to  withdraw  it 
from  business,  or  that  encourages  them  to  be- 
lieve that  if  they  lend  their  money  they  will  get 
it  back  again. 

These  are  the  matters  that  require  decision 
by  Government,  and  they  are  really  very  simple 


144  INDUSTRIAL    FRF.EDOM. 

matters.  They  arc  larpdy  moral  questions,  and 
rr(|iiirc  only  the  exercise  of  ordinary  courtesy, 
sincerity,  and  honesty  for  tiieir  solution.  And 
on  their  proper  solution  the  prosperity  of  labour- 
ing men  depends  far  more  than  on  any  schemes 
of  profit  sharing  or  compulsory  increase  of  wages. 
Such  a  solution  would  in  a  short  period  result 
in  the  creation  of  new  wealth  sufficient  not  only 
to  increase  the  wages  fund  more  than  it  could 
possibly  be  increased  by  any  legislative  device, 
but  also  to  maintain  or  even  enlarge  the  present 
rate  of  profit. 

We  may  sum  up  the  matter  by  saying  that 
labourers  will  best  promote  their  own  interest  by 
struggling  to  promote  the  general  interest.  The 
influences  that  promote  the  general  welfare  are 
of  a  large,  simple,  and  universal  character;  they 
are  capable  of  comprehension  by  ordinary  people. 
Those  that  afifect  the  prosperity  of  a  particular 
enterprise  or  interest  are  frequently  special,  com- 
plicated, and  technical.  They  require  not  only 
peculiar  training,  but  also  peculiar  talent  for  their 
comprehension.  Those  who  comprehend  them 
seem  to  do  so  by  a  kind  of  business  intuition; 
they  are  often  unable  to  give  correct  reasons  for 
their  correct  judgment,  and  they  could  not  act 
with  the  necessary  promptness  and  decision  if 
they  had  to  explain  their  motives  to  their  la- 


THE    PARTNERSHIP    THEORY.  145 

bourers  or  their  representatives.  Even  as  it  is, 
labourers  run  the  risk  of  losing  by  the  failure 
of  their  employers.  They  may  be  thrown  out  of 
work;  they  may  have  to  seek  new  employments. 
To  this  extent  they  are  now  in  partnership  with 
their  employers,  and  it  is  a  sufificient  extent. 
They  receive  their  wages  so  long  as  the  business 
continues,  perhaps  long  after  the  business  has 
ceased  to  be  profitable.  Their  savings  are,  on 
the  whole,  better  placed  where  they  are  more 
secure  than  they  can  be  in  any  single  investment, 
and  where  there  is  little  danger  of  their  being 
w^holly  lost,  even  if  the  rate  of  interest  seems  dis- 
couragingly  small. 


CTT APTKR   X. 

WHAT    LIMITS    THK    KATK    OF    WAGES. 

In  llic  i)rcvit)u.s  cliajjlcrs  \vc  have  examined 
tlic  charge  that  the  employees  of  corporations 
are  treated  with  less  justice  than  those  of  indi- 
viduals. This  examination  has  been  protracted 
to  what  may  seem  a  tedious  length,  but  its  re- 
sults will  shorten  and  simplify  the  remainder  of 
the  in(juiry.  Ihat  will  evidently  involve  both 
the  justice  of  the  wages  system  itself  and  that  of 
the  great  fortunes  which  appear  to  be  its  out- 
growth. All  that  we  have  hitherto  formally  ac- 
complished has  been  merely  to  prove  that,  under 
this  system,  workmen  are  no  more  industrial 
slaves  when  employed  by  corporations  than  when 
employed  by  individuals.  Conceding  this,  the 
real  grievance,  as  originally  stated,  remains  the 
same.  The  quantity  of  destitution  is  not  less- 
ened, suffering  is  not  decreased,  nor  opportuni- 
ties of  development  enlarged  by  any  demonstra- 
tion that  one  class  of  employers  is  no  worse  than 

another.     The  "  bitter  cry  "  of  the  poor  can  not 

146 


WHAT    LIMITS    THE    RATE    OF    WAGES.         14/ 

be  Stilled  by  abstract  arguments  and  considera- 
tions of  this  character.  It  may  be  quite  true 
that  corporations  deal  as  justly  as  individuals 
with  their  men,  but  those  whose  feeling  of  re- 
sponsibility for  the  poor  has  been  aroused  will 
not  be  contented  by  the  establishment  of  this 
truth.  They  may  be  convinced  that  they  were 
in  error  in  regarding  the  existence  of  corpora- 
tions as  the  cause  of  the  evils  of  which  they 
complain,  but  the  correction  of  the  error  does 
not  correct  the  evils.  If  corporations  are  not  the 
cause  of  injustice,  some  other  cause  must  be 
sought,  for  the  discovery  of  a  defect  in  our  diag- 
nosis can  not  be  treated  as  curing  the  disease. 

Is  it  then  possible,  by  any  conceivable  reform 
of  the  present  industrial  system,  or  by  the  intro- 
duction of  a  different  system,  to  increase  the  com- 
pensation received  by  labourers  for  their  toil? 
To  answer  this  question  we  must  in  the  first 
place  examine  the  causes  that  determine  the 
present  rate  of  compensation.  Some  writers  on 
political  economy  have  laid  it  down  that,  at  any 
given  time,  there  is  a  certain  amount  of  wealth 
devoted  to  the  payment  of  wages,  and  that,  as 
there  must  be  a  definite  number  of  labourers  in 
existence  at  that  time,  the  rate  of  wages,  possi- 
ble or  actual,  can  be  ascertained  by  a  simple 
process  of  arithmetical  division.      From  this  it 


148  INDUSTIUAL    1  KHEDOM. 

has  been  iiifcrrc<l  iliat  tlic  only  way  to  increase 
vva^cs  nujst  I;c  cither  to  iiicrrasc  the  wages  fund 
or  to  decrease  the  nunihcr  oi  labourers;  to  en- 
larj;i-  till-  dividend  or  lessen  the  divisor.  This 
view  has  been  criticised  as  assuming  a  fixity  in 
the  wages  fund  that  does  not  correspond  with 
fact.  It  is  no  doubt  true  that  at  any  given  mo- 
ment the  average  rate  of  wages  would  be  ascer- 
tained by  dividing  the  sum  actually  paid  by  the 
number  actually  receiving  it,  but  this  arithmetical 
proposition  does  not  explain  the  causes  which 
produce  the  wages  fund  and  determine  its  size, 
or  the  causes  that  influence  the  growth  of  the  la- 
bouring class. 

The  ultimate  source  of  the  wages  fund  is  to 
be  found  in  the  fact  that  under  certain  condi- 
tions the  labour  of  mankind  produces  more 
wealth  than  is  necessary  for  their  support.  That 
portion  W'hich  can  be  spared  may  be  spent  in 
the  immediate  gratification  of  luxurious  desires, 
or  it  may  be  wliolly  or  partly  applied  to  the  pro- 
duction of  increased  wealth,  in  which  case  it  re- 
ceives the  name  of  capital,  and  such  of  it  as  is 
paid  directly  to  labourers  is  called  wages.  The 
motive  which  induces  men  to  refrain  from  the  im- 
mediate enjoyment  of  wealth  and  to  risk  it  in 
the  various  enterprises  of  human  industry  is  the 
desire  of  gain  or  profit.     Unless  there  were  a  rea- 


WHAT    LIMITS    THE    RATE    OF    WAGES.        149 

sonable  expectation  of  obtaining  an  increase  of 
his  grain,  the  farmer  would  have  no  motive  for 
ploughing  and  harrowing  the  land  and  consigning 
the  seed  to  it.  It  is  quite  unnecessary  to  describe 
this  motive  as  a  selfish  one.  The  use  made  of 
profits  may  be  selfish,  but  men  desire  to  make 
them  quite  as  much  for  the  sake  of  others  as 
for  their  own  sake.  We  may  therefore  prop- 
erly regard  the  desire  to  obtain  a  profit  from  the 
use  of  capital  as  nothing  intrinsically  reprehensi- 
ble. It  is  on  many  accounts  praiseworthy,  and 
is  certainly  not  only  advantageous,  but  indis- 
pensable to  human  society.  Were  it  otherwise, 
the  desire  could  not  be  realized;  for,  in  general,  it 
is  only  when  wealth  is  employed  for  the  benefit  of 
others  that  its  owner  is  enabled  to  secure  a  gain 
for  himself. 

For  the  sake  of  simplifying  the  argument, 
we  must  assume  that  we  are  dealing  with  a  con- 
stant number  of  labourers,  or  that  it  increases 
only  in  its  usual  ratio.  We  may  also  fairly  as- 
sume that  the  conditions  of  production  remain 
the  same,  or  vary  only  at  the  prevailing  rate. 
Under  these  circumstances,  that  increased  com- 
pensation for  their  toil  demanded  for  labourers 
by  justice  must  come  out  of  that  part  of  the 
wealth  of  the  community  heretofore  set  apart  by 
its   owners   for  other  purposes.      And   it   must 


150  INDUSTRIAL    FRKKDOM. 

como  not  from  the  fixed  wealth  of  the  commu- 
nity,  I)Ul    fiom   its   income   or   revenue, 

\\\altli  in  the  shape  of  machinery  and  biiild- 
inj^s,  and  railroads,  and  im|)rovements  of  land, 
can  not  he  converted  into  <nher  forms.  Prop- 
erty in  these  permanent  investments  may  be  sold; 
hut  transfers  of  title  do  not  afTect  the  nature  of 
its  subject.  Such  wealth  is  valuable  only  for  its 
uses,  and  these  are  measured  by  the  income  or 
revenue  derivable  from  it.  This  revenue  is  for 
the  most  part  in  such  a  form,  or  convertible 
into  such  a  form,  as  to  be  applicable  to  the  pay- 
ment of  wages;  and  out  of  it,  in  the  long  run, 
wages,  and  any  increase  of  wages,  must  come, 
however  the  fact  may  be  disguised  by  the  use 
of  money. 

What  is  known  as  circulating  capital  is,  it 
is  true,  frequently  in  a  shape  to  be  applicable  to 
the  support  of  labourers;  but  circulating  capital 
itself  comes  into  existence  in  the  shape  of  rev- 
enue. And  since  we  have  used  the  term  profits 
as  signifying  the  return  from  the  employment 
of  capital,  it  will  simplify  our  reasoning  if  we  ad- 
here for  the  present  to  this  meaning,  and  under- 
stand by  profits  whatever  revenue  is  received  by 
any  one  from  other  sources  than  the  sale  of  his 
labour.  We  shall  be  obliged,  after  a  while,  to 
distinguish  between  interest  and  profits  in  the 


WHAT    LIMITS    THE    RATE    OF    WAGES.        I5I 

technical  sense,  but  as  we  are  concerned  here 
with  the  fundamental  distinction  between  the 
reward  of  capital  and  that  of  labour,  we  may 
properly  speak  of  the  whole  revenue  of  the  com- 
munity as  divisible  into  wages  and  profits.  At 
any  given  time,  therefore,  an  increase  of  the  one 
involves  a  decrease  of  the  other. 

It  does  not  follow  from  this  that  such  a 
diminution  of  that  part  of  the  general  revenue 
as  would  be  applied  to  other  purposes  than  the 
payment  of  wages  may  not  eventually  result  in 
an  increase  of  the  gross  revenue.  On  the  con- 
trary, such  a  diminution  constantly  tends  to  take 
place  under  the  expectation  of  just  such  an  in- 
crease. Nearly  every  one,  under  the  temptation 
of  very  great  profits,  will  economize  in  his  ex- 
penditure for  luxuries  and  apply  his  savings  to 
these  attractive  investments.  But  the  real  mo- 
tive, generally  speaking,  for  his  disposition  to 
increase  his  future  revenue  is  the  expectation  of 
increasing  that  part  of  it  which  is  applicable  to 
the  promotion  of  his  own  comfort,  or  the  com- 
fort of  other  persons  in  whose  welfare  he  is  in- 
terested. If  he  understood  that  no  increase  of 
his  profits  could  be  controlled  by  him,  but  must 
all  be  devoted  to  increasing  the  wages  of  labour- 
ers, the  situation  would  be  very  different  from 
what  it  now  is.     We  need  not  be  so  hasty  as  to 


152  INDUSTRIAL    FREEDOM. 

assert  tliat  uiwlfr  such  circumstances  no  one 
wouM  !)(.•  disposed  to  deny  himself  in  the  manner 
su|)i)()scd.  This  may  or  may  not  be  true,  but 
it  is  clear  tiiat  the  present  motives  for  such  self- 
denial  would  be  extinj^uished, 

'J'hc  sug^gestion  may  be  made  that  increased 
wages  will  cause  increased  production  through 
the  increased  efficiency  of  labourers.  The  result 
would  therefore  be  a  larger  fund  to  be  divided, 
and  the  apparent  sacrifice  made  by  employers 
might  be  after  all  only  an  investment  of  a  pn^fita- 
ble  nature.  This,  however,  would  be  true  only  if 
the  sacrifice  did  not  have  to  be  repeated,  for  if 
the  process  were  perpetual  the  employers  could 
never  recover  their  original  loss.  Their  gross 
profits  would  be  continually  enhanced,  but  the 
share  of  them  available  for  their  own  consump- 
tion would  steadily  diminish.  Were  it  other- 
wise we  should  have  a  mere  repetition  of  the 
present  state  of  affairs.  It  is  notorious  that  the 
wages  of  labourers  have  steadily  and  very  greatly 
risen  during  this  century;  and  they  have  risen 
in  precisely  this  way.  When  we  speak  of  wages 
as  determined  by  competition,  we  mean,  if  we 
look  into  the  matter,  that  employers  are  con- 
stantly bidding  against  each  other  for  the  services 
of  workmen.  When  we  say  that  wages  are  ris- 
ing, we  mean  that  some  employers,  tempted  by 


WHAT    LIMITS    THE    RATE    OF    WAGES.        153 

the  anticipation  of  future  profits,  have  deter- 
mined to  apply  a  larger  proportion  of  their 
present  profits  to  the  payment  of  labourers, 
and  a  smaller  proportion  to  their  own  consump- 
tion. 

Bearing  in  mind  our  postulates  concerning 
the  number  of  labourers,  we  see  that  such  em- 
ployers can  increase  their  force  only  by  draw- 
ing away  some  labourers  from  other  employers. 
This  they  can  do  only  by  offering  them  higher 
wages  than  they  are  receiving,  and  their  present 
employers,  if  they  would  retain  them,  must  meet 
the  advance.  As  a  matter  of  fact,  some  of  them 
are  not  able  to  do  so,  or  do  not  think  it  worth 
while,  and  thus  labourers  are  constantly  drawn 
into  those  branches  of  industry  which  are  at  any 
given  time  most  profitable.  The  whole  move- 
ment is  thus  determined  by  the  expectation  of 
greater  profits,  which  during  the  present  century, 
owing  to  a  number  of  causes,  have  been  largely 
realized. 

It  is,  of  course,  natural  for  employers  to 
wish  to  keep  their  expense  for  wages  at  as  low 
a  figure  as  possible.  It  is  equally  natural  for 
them  to  desire  to  keep  their  expenditure  for  ma- 
terials and  machinery  at  the  lowest  possible  fig- 
ure. But  as  they  buy  these  goods  with  the 
greatest  attention  to  their  quality  and  service- 


154  INDUSTRIAL    FRKF.DOM. 

al)ility,  as  well  as  llnir  price,  so  they  pay  much 
regard  to  the  cITiciency  of  their  lahourcrs.  Their 
aim  is  to  make  a  profit,  and  tlicy  are,  as  a  rule, 
aware  that  this  is  not  to  he  made  with  had  ma- 
terials or  had  work.  It  is  certainly  reasonahle 
to  presume  that  they  arc  f|uitc  as  well  aware  of 
the  advantages  of  employing  a  high  quality  of 
lahour  as  those  professedly  unselfish  philanthro- 
pists who,  although  frequently  unaccjuainted 
with  the  conduct  of  husiness,  undertake  to  in- 
struct husiness  men  in  this  particular.  The  aims 
of  these  philanthropists  may  be  highly  lauda- 
ble, but  it  can  not  be  denied,  however  paradox- 
ical the  assertion  may  sound,  that  increased 
wages  are  the  result  of  the  voluntary  acts  of  em- 
ployers. They  are  frequently  said  to  be  com- 
pelled to  pay  higher  wages,  but  there  is  a  sup- 
pressed alternative.  They  need  not  pay  them  at 
all  unless  they  choose;  but  while  they  may  be 
indifferent  to  the  welfare  of  their  workmen  as 
an  end  in  itself,  they  are  not  blind  to  its  relation 
to  their  own  profit.  Some  of  them  would  per- 
haps be  glad  if  they  could  increase  their  profits 
by  diminishing  their  payments  for  wages;  but  the 
history  of  this  century  shows  conclusively  that 
employers  as  a  class,  or  capitalists,  if  the  term 
be  preferred,  have,  consciously  or  unconsciously, 
acted    on    the    principle    that    increased    profits 


WHAT    LIMITS    THE    RATE    OF    WAGES.       155 

could  not  be  obtained  without  paying  increased 
wages. 

It  is  further  to  be  observed  that  the  increased 
profits  of  which  we  have  just  spoken  are  gross 
profits,  and  have  been  apparently  realized,  on  the 
whole,  not  only  not  through  an  increase  in  the 
rate  of 'profit,  but  in  spite  of  a  decrease  in  that 
rate.  As  Adam  Smith  remarks,  it  is  practically 
impossible  to  ascertain  what  is  the  average  profit 
of  all  the  different  trades  carried  on  in  a  country; 
but  some  notion  of  it  may  be  formed  from  the 
interest  of  money.  "  It  may  be  laid  down  as  a 
maxim,  that  wherever  a  great  deal  can  be  made 
by  the  use  of  money  a  great  deal  will  commonly 
be  given  for  the  use  of  it;  and  that  wherever 
little  can  be  made  by  it,  less  will  commonly  be 
given  for  it." 

Measured  by  this  test,  it  would  seem  that 
the  rate  of  profit  is  now  scarce  one  half  what  it 
was  fifty  years  ago.  At  all  events  it  has  con- 
siderably fallen,  while  the  rate  of  wages  has  con- 
siderably risen.  A  great  many  persons,  there- 
fore, must  have  continually  decided  that,  al- 
though they  could  not  obtain  the  same  rate  of 
profit  as  before,  they  would  nevertheless  increase 
their  savings.  In  other  words,  they  have  less- 
ened the  proportion  of  their  total  revenue  which 
they  devote  to  their  own  consumption,  and  en- 


15^  INDUSTRIAL    FREEDOM. 

largcd  the  proportion  which  they  devote  to  the 
payment  of  wages. 

Such  being  the  case,  it  might  seem  that  our 
iiujuiry  could  be  sj)cc(hly  terminated.  Experience, 
it  might  be  urged,  has  shown  that  what  justice  re- 
quires is  practicable.  Since  employers  liave  in  the 
past  increased  wages  by  reducing  the  proportions 
of  their  own  luxurious  expenditures,  they  can  do 
so  in  the  future,  and  according  to  all  the  require- 
ments of  justice  it  is  just  that  they  should.  If 
the  dcmaiul  had  been  made  upon  them  at  any 
former  period  they  would  have  declared  it  im- 
possible to  comply  with  it;  but  the  sequel  has 
proved  that  they  were  wrong.  There  are  many 
evidences  that  a  vast  amount  of  wealth  is  every- 
where expended  in  luxurious  consumption,  some 
of  which  might  certainly  be  curtailed  without 
detriment  to  the  welfare  of  any  one;  and  while 
this  is  so,  the  justice  of  the  claim  of  labour  to 
increased  compensation  can  not  be  denied  on  the 
ground  of  impossibility. 

It  may  be  conceded  at  once  that,  so  long  as 
anv  luxury  at  all  is  enjoyed  by  employers,  there 
is  a  fund  in  existence  out  of  which  increased 
wages  could  be  paid.  But  the  difficulty  lies 
somewhat  deeper  than  this.  Hitherto,  as  we 
have  seen,  there  has  been  a  gradual  increase  of 
wages,  caused  by  employers'  desire  to  increase 


WHAT    LIMITS    THE    RATE    OF    WAGES.       15/ 

their  gross  profits.  This  increase  has  been  at- 
tended with  a  decrease  in  the  rate  of  profit,  but 
this  rate  has  still  been  sufficient  to  encourage 
accumulation.  It  does  not  follow  that  accumu- 
lation will  continue,  no  matter  what  the  rate  of 
profit.  What  the  possible  minimum  may  be  we 
can  not  tell,  although  the  experience  of  the  past 
informs  us  of  no  lower  rate  of  interest  than  the 
present;  but  we  can  assert  positively  that  there 
must  be  a  minimum,  and  that  we  have  ap- 
proached it  very  rapidly.  If  the  present  order 
is  undisturbed,  we  may  still  see  an  increasing 
rate  of  wages  and  a  declining  rate  of  profit, 
which  will  eventuate  in  an  equilibrium;  the  rate 
of  profit  becoming  so  low  that  people  will  pre- 
fer to  spend  some  income  which  they  would  have 
saved  had  the  rate  of  profit  been  higher.  Be- 
yond that  point  no  increase  of  wages  can  take 
place  unless  the  number  of  labourers  diminishes; 
and  if  it  should  increase,  wages  would  fall. 

Hence  what  is  really  demanded  in  the  name 
of  justice  is  an  artificial  acceleration  of  this 
process,  a  compulsory  attainment  of  this  equilib- 
rium. In  short,  the  rate  of  profit  ought  to  be 
at  once  reduced  by  law  to  whatever  figure  it 
would  eventually  attain  through  the  voluntary 
action  of  the  owners  of  capital.  So  long  as  free- 
dom of  contract  exists  no  lower  figure  can  be 


15^  INDUSTRIAL    FREKDOM. 

rcaclicd.  aiid  any  attempt  to  do  so  would  be  mere 
confiscation.  Sucli  attempts  would  result  in  the 
communism  which  is  the  ideal  (A  Karl  Marx  and 
his  followers.  They  rej^'ard  all  profits  as  unjust, 
and  hold  that  the  whole  product  of  capital  and 
labour  belongs  to  the  labourer.  Jiut  it  is  not 
worth  while  to  criticise  this  theory.  Its  imprac- 
ticability has  been  so  often  exposed  that  vvc  need 
only  say  that  the  destruction  of  the  motive  for 
saving  would  inevitably  lessen  the  fund  available 
for  production,  out  of  which  wages  must  come. 


CHAPTER  XL 

THE     NATURE     OF     PROFITS,     AND     SOME 
CONSEQUENCES  OF  REDUCING  THEM. 

When  we  speak  of  capital  and  projfits  we 
generally  think  of  them  as  belonging  exclusively 
to  employers.  But  we  have  now  reached  a  point 
where  we  must  recognise  the  blurring  of  the 
lines  that  in  theory  divide  economic  classes.  We 
can  not  ignore  the  fact  that  labourers,  as  a  class, 
have  accumulated  enormous  amounts  of  capital, 
and  have  to  that  extent  made  it  to  their  advan- 
tage that  the  rate  of  interest  should  be  main- 
tained. They  are  lenders  to  their  masters,  and, 
like  other  creditors,  they  are  benefited  by  the 
prosperity  of  their  debtors.  To  some  extent  they 
may  hoard  their  savings,  but  in  the  main  they 
flow  quickly  into  the  reservoirs  of  capital.  Even 
in  agricultural  States,  where  there  are  few  savings 
banks,  thrifty  labourers  manage  to  invest  what 
they  save  from  their  wages,  either  buying  land 
and  stock,   or  lending   to   their   employers   and 

others  needing  capital.     But  the  savings  banks 

159 


l6o  INDUSTIUAr.    rRF.r.DONf. 

arc  the  mnsl  important  as  well  as  conspicuous 
means  of  investment  for  funds  of  this  descrip- 
tion. 

in  the  year  i«S(;3  the  dejjosits  in  the  savinj^s 
hanks  of  the  United  States  amounted  to  about 
$i,8oo,C)00,(X)0,  and  the  depositors  numhcred 
4,830,000.  the  average  deposit  being  about  $370. 
Durinj;-  the  decade  preceding,  the  aggregate  de- 
posits had  nearly  doubled.  These  institutions, 
as  we  have  seen,  are  confined  to  populous  com- 
munities. Nearly  five  sixths  of  the  total  depos- 
its are  found  in  the  banks  of  the  Eastern  and 
Middle  States,  and  about  that  proportion  of  the 
depositors  belong  there.  The  deposits  in  Massa- 
chusetts are  somewhat  over  $400,000,000,  cred- 
ited to  about  1.200,000  accounts;  in  New  York 
they  are  not  far  from  $700,000,000,  the  depositors 
numbering  over  1,600,000.  In  Massachusetts,  it 
would  appear,  every  other  person  may  have  an 
account  at  the  savings  bank;  in  New  York,  every 
fourth  person.  Taking  the  Eastern  and  Middle 
States  together,  it  would  be  approximately  cor- 
rect to  say  that  every  unmarried  adult  and  every 
head  of  a  family  may  keep  a  savings  account,  the 
average  amount  of  which  would  nearly  equal  a 
year's  earnings. 

Allowance  must  be  made  for  the  notorious 
fact  that  many  comparatively  well-to-do  persons 


THE    NATURE    OF    PROFITS.  l6l 

make  use  of  the  savings  banks,  and  that  they 
often  keep  several  accounts.  Many  institutions 
and  associations  also  find  the  savings  banks  con- 
venient for  certain  purposes,  so  that  the  number 
of  depositors  belonging  to  the  labouring  class 
must  be  considerably  less  than  the  total  number. 
On  the  other  hand,  there  are  numberless  other 
ways  in  which  this  class  invests  its  savings.  Its 
members  frequently  take  out  life  and  accident 
insurance  policies,  join  building  associations,  and 
belong  to  various  unions,  orders,  or  societies, 
which,  as  we  know  by  the  returns  collected  in 
Great  Britain  as  well  as  this  country,  have  col- 
lectively very  large  funds.  Many  thrifty  labour- 
ers lend  their  savings  on  personal  security,  or 
even  on  bond  and  mortgage;  and  where  there 
are  no  banks,  as  we  have  observed,  such  methods 
are  necessary.  On  the  whole,  if  we  take  into 
consideration  the  large  number  of  labourers  who 
are  drunken  and  improvident,  it  would  perhaps 
not  be  unreasonable  to  suppose  that  a  thrifty 
labourer  and  his  family  in  one  of  the  manufac- 
turing States  may  on  an  average  possess  a  thou- 
sand dollars,  which  is  properly  classified  as  capi- 
tal, in  addition  frequently  to  other  personal  and 
even  real  property.  Any  reduction  in  the  rate 
of  interest,  therefore,  would  occasion  such  per- 
sons an  appreciable  loss. 


1^2  INDL'STKIAL    FREEDOM. 

This  loss,  it  is  evident,  would  he  very  unevenly 
dislrilntlcd.  Workmen,  while  in  their  prime  and 
in  receipt  of  good  wages,  endeavour  to  accumu- 
late an  insurance  fund,  and  as  they  gradually 
increase  it  by  additions  from  their  savings,  the 
rate  of  interest  it  bears  cU^es  not  seem  of  very 
great  importance;  but  when  they  sutler  from 
sickness,  or  become  old,  or  from  any  cause  find 
their  wages  cut  off,  the  interest  derived  from 
their  savings  becomes  of  more  consequence. 
This  interest  can  seldom  be  sufficient  for  their 
support,  but  it  may  often  be  sufficient  to  post- 
pone the  exhaustion  of  the  principal  until  the 
purpose  for  which  it  was  accumulated  is  accom- 
plished. A  reduction  of  interest  to  any  consider- 
able extent  might  operate,  as  has  been  pointed 
out,  to  diminish  saving  or  to  increase  hoarding, 
and  any  compulsory  measures  intended  to  bring 
it  about  would  certainly  seem  unjust  to  those 
who  had  by  long  self-denial  accumulated  a  fund 
for  support  in  their  declining  years.  The  re- 
tired or  incapacitated  labourer,  under  such  cir- 
cumstances, becomes  really  a  small  capitalist;  he 
ceases  to  be  interested  in  the  increase  of  wages 
at  the  expense  of  interest.  The  number  of  such 
persons,  especially  of  the  female  sex.  is  very  large, 
and  their  protest  against  the  overthrow  of  their 
calculations  would  be  far  from  unreasonable. 


THE    NATURE    OF    TROFITS.  163 

The  only  class  of  labourers  whose  gain  from 
the  proposed  change  would  have  no  offsets  would 
be  those  who  spend  all  their  wages  as  fast  as  they 
get  them.  But  we  can  not  ignore  the  fact  that 
this  class  of  labourers  contains  many  criminal 
and  vicious  members.  While  they  are  perhaps 
not  to  be  blamed  for  a  moderate  indulgence  in 
alcoholic  drinks,  their  indulgence  is  often  im- 
moderate. The  consumption  of  such  drinks  is, 
of  course,  not  confined  to  this  class  of  labourers, 
but  it  is  notorious  that  excessive  indulgence 
therein  regularly  accompanies  lack  of  thrift. 
Drunkenness  and  frugality  are  incompatible;  and 
hardly  any  complaint  is  more  common  among 
the  poor  than  that  men  who  get  good  wages  will 
spend  them  in  drink  instead  of  providing  for  their 
families. 

It  would  be  absurd  to  maintain  that  wages 
ought  to  be  kept  low  in  order  to  discourage 
drunkenness;  but  it  can  not  be  denied  that  a  rise 
of  wages  promotes  it.  The  excise  returns  are 
sufficient  evidence  of  this,  so  that  it  is  said  in 
England  that  the  people  drink  the  Government 
out  of  debt.  We  may  rejoice  in  advancing  wages, 
but  it  is  necessary  to  remember  that  they  have 
this  drawback.  The  evil  is  insignificant  in  com- 
parison with  the  good;  but  we  can  not  disre- 
gard the  fact  that  in  our  code  of  morals  prudence 


i^j4  industrial  frkkdom. 

has  always  occiipicMl  a  lii^li  rank.  The  thrifty 
labourer  is  jjiaiscd  and  the  iminov  idciit  one  con- 
(kiuncd.  JMiihmtljropists  have  busied  themselves 
in  cncouraj^diij;  lahourcrs  to  save,  and  in  dcvisinj^ 
institutions  whereby  their  savings  might  be  most 
profitably  invested.  The  whole  tendency  of  the 
advice  given  to  the  j^oor  has  been  to  impress 
on  them  the  importance  and  merit  of  getting 
rich.  The  labourer  is  told  that  it  is  his  duty 
to  lay  up  against  a  rainy  day;  to  provide  against 
sickness  and  old  age  and  death.  lie  is  appealed 
to  to  save  his  earnings  in  order  that  he  may  give 
his  children  a  better  start  in  life  than  he  has 
had;  that  he  may  be  able  to  benefit  others  as 
well  as  himself.  It  is  incredible  that  all  of  this 
teaching  should  be  wrong,  and  that  lavishness 
and  improvidence  are  the  true  ideals  for  working- 
men  to  adopt.  We  must  maintain  that  the  tra- 
ditional morality  is  sound,  and  that  if  workmen 
get  higher  wages,  they  ought  to  save  some  of 
the  increase. 

It  is  occasionally  urged  that  wages  are  earned 
in  order  to  be  spent.  You  can  not  eat  your 
cake  and  have  it  too;  and  as  cake  is  meant  to 
be  eaten,  it  is  wiser  to  eat  it  than  keep  it.  But 
man  looks  before  and  after.  Whether  labourer 
or  capitalist,  he  desires  to  provide  something  for 
the  future  support  of  himself  and  his  family,  and 


THE    NATURE    OF    PROFITS,  165 

the  sense  of  increased  security  is  itself  a  pleasur- 
able gratification.  The  labourer,  it  is  true,  in- 
dulges in  some  additional  comforts  as  his  savings 
grow,  and  the  capitalist  who  finds  his  profits  in- 
creasing from  year  to  year  enlarges  his  scale  of 
living;  but  the  evidence  is  abundant  that  the 
propensity  to  save  is  very  strong  with  both  of 
them,  and  that  it  is  of  the  greatest  value  to  the 
individual  and  to  society.  At  the  same  time  we 
must  recognise  the  fact  that  these  economies 
tend  to  defeat  their  own  object.  The  more  sav- 
ings are  swelled,  the  lower  goes  the  rate  of  in- 
terest, and  as  the  labourer  becomes  more  of  a 
capitalist  he  is  rewarded  less. 

I  have  dwelt  at  much  length  on  the  economic 
position  of  the  working  classes,  because  progress 
seems  to  depend  on  their  becoming  transformed 
into  capitalists.  No  one  will  deny  that  the  ac- 
quisition of  property  by  labourers  is  on  every  ac- 
count desirable.  But  these  acquisitions  must, 
from  the  nature  of  the  case,  assume  principally 
the  form  of  loanable  capital.  They  are  concen- 
trated in  banks  and  distributed  by  them  among 
the  various  channels  of  production.  Any  seri- 
ous disturbance  of  the  accustomed  flow  in  these 
channels  not  only  reduces  the  income  of  labour- 
ers' savings,  but  imperils  the  principal.  Meas- 
ures that  profess  to  increase  wages,  but  that  ren- 


lC»6  INDUSTRIAL    FRKF.DONf. 

(Ur  lluir  invcstniciil  unprofitahlc  or  unsafe,  are 
nnl  likely  to  he  of  any  ptTmaiiciil  hcnclU  t(j  the 
poor. 

While  a  lar«;c  part  of  the  present  fund  of  loan- 
able eapilal  consists  of  savinj^s  out  of  wages,  the 
greater  part  consists  of  savings  out  of  profits. 
'J'he  position  of  those  who  own  these  savings 
may  be  quite  different  from  that  of  employers 
as  a  class.  The  latter  are  borrowers;  the  former 
are  lenders.  The  employer  who  uses  his  own 
capital  may  not  be  directly  concerned  in  the  rate 
of  interest.  The  employer  who  borrows  is  di- 
rectly concerned,  and  apparently  concerned  that 
it  should  be  low.  Apparently,  too,  those  whose 
operations  are  most  successful  and  on  the  largest 
scale  are  most  benefited  by  lowering  the  rate  of 
interest.  Their  abilities  enable  them  to  make 
higher  profits  than  most  employers,  and  if  they 
can  increase  their  capital  at  small  expense  they 
may  be  able  to  extend  their  business  greatly  and 
make  even  higher  profits.  An  artificial  reduction 
of  the  rate  of  interest  might  thus  affect  the  dif- 
ferent classes  that  are  commonly  included  under 
the  generic  name  of  capitalists  very  differently. 
Those  people  who  depended  mainly  on  interest 
for  their  support  would  suffer,  while  those  whose 
income  arose  from  profits  might  be  the  gainers. 
In  fact,  as  will  appear  later,  the  attempt  of  the 


THE    NATURE    OF    PROFITS.  167 

Legislature  to  increase  the  reward  of  labour  at 
the  expense  of  capital  may  not  only  fail  to  benefit 
labourers,  but  may  enable  those  capitalists  whose 
gains  are  on  the  largest  scale  to  increase  them 
at  the  expense  of  those  whose  gains  are  the 
smallest. 

The  number  of  persons  supported  wholly  or 
partly  by  interest  as  distinguished  from  profits 
is  now  very  great.  As  we  have  seen,  many  la- 
bourers get  a  part  of  their  income  in  this  way, 
and  as  w^e  go  up  the  scale  we  find  that  an  in- 
creasing proportion  of  income  is  derived  from 
this  source.  People  who  own  their  houses  are 
practically  in  receipt  of  interest  on  their  cost, 
and  such  people  are  numberless.  The  natural 
consequence  of  our  increased  wealth  has  been  a 
more  extensive  provision  for  the  future  by  those 
who  have  acquired  it.  Fathers  are  anxious  to 
insure  their  children  against  the  cares  and  suffer- 
ings of  poverty;  they  wish  to  enable  them  to  live 
in  comfort  and  to  be  able  to  enjoy  some  of  the 
refinements  of  life.  A  few  of  them  are  foolish 
enough  to  desire  that  their  sons  shall  not  engage 
in  any  useful  pursuit;  more  are  fond  enough  to 
prefer  that  their  daughters  shall  not  earn  their 
own  living.  Probably  the  prevaihng  feeling  is 
that,  in  view  of  the  uncertainty  of  health,  the 

vicissitudes  of  employment,  and  the  possibilities 
12 


l68  INDUSTRIAL    1  KKI.IXJM. 

of  unfortunate  marriage,  children  should  be  edu- 
cated so  that  they  may  he  useful,  and  at  the  same 
time  made  independent  of  the  necessity  of  being 
useful.  The  rcMdt  is  that  our  middle  class,  or 
at  least  the  upper  part  of  it,  contains  a  large 
number  of  persons  of  this  description,  and  they 
constitute  an  extremely  valuable  element  in  our 
society.  The  professions  are  to  a  great  extent 
recruited  from  this  class;  its  existence  makes  the 
cultivation  of  the  refined  arts  possible,  and  it 
furnishes  nuich  of  the  large  force  of  volunteers 
retpiired  in  our  charitable  and  religious  enter- 
prises. 

The  tendency  of  a  fall  in  the  rate  of  interest, 
from  whatever  cause,  is  to  check  the  increase  of 
this  class.  The  sum  of  money  that  formerly 
provided  for  their  support  can  not  now  furnish 
that  support.  Some  of  those  who  had  leisure 
for  liberal  and  benevolent  pursuits  must  give 
them  up  and  devote  themselves  to  earning  a  liv- 
ing. ^Marriages  will  be  delayed,  and  will  be,  as 
in  France,  more  and  more  unproductive.  The 
descendants  of  the  early  settlers  of  \cw  Eng- 
land are  already  a  dying  stock,  and  their  places 
are  taken  by  immigrants  of  recent  date,  of  more 
reproductive  capacity,  but  of  inferior  culture. 
So  strong  is  the  desire  to  rise  in  the  social  scale 
and  to  maintain  the  ground  that  has  been  won, 


THE    NATURE    OF    PROFITS.  169 

that  more  and  more  persons  prefer  not  to  marry, 
but  to  purchase  annuities  or  to  consume  their 
principal,  leaving  at  their  death  neither  posterity 
nor  the  wealth  by  which  it  might  have  been 
supported. 

It  is  true  that  there  are  many  people  who 
make  a  bad  use  of  property  that  comes  to  them 
by  gift  or  inheritance.  This  is  apt  to  be  the  case 
with  suddenly  acquired  wealth.  When  fathers 
are  absorbed  in  making  money  they  can  not  at- 
tend to  the  training  of  their  sons,  and  the  sons, 
being  petted  and  indulged,  grow  up  unfitted 
either  to  earn  money  or  to  take  care  of  it.  But 
when  a  family  has  been  wealthy  for  generations 
this  tendency  is  less  marked.  Men  have  leisure 
for  other  pursuits  besides  that  of  getting  rich, 
and  they  can  bring  up  their  children  in  those 
habits  which  are  indispensable  when  the  per- 
manent possession  of  wealth  is  at  stake.  In  this 
way  an  enduring  class  of  well-to-do  people,  who 
are  also  educated,  cultivated,  and  benevolent,  is 
created.  It  can  not  exist  without  a  substantial 
basis  of  property,  and  it  must  be  diminished  by 
any  sudden  reduction  of  the  return  from  invest- 
ments. It  does  not  follow  that  this  loss  may  not 
be  made  up  for  by  gains  in  other  directions;  but 
it  must  not  be  forgotten,  when  we  reckon  these 
gains,  that  there  are  losses  also  to  be  estimated. 


170  INDUSTRIAL    FRKEDOM. 

In  this  connection  \vc  may  refer  to  the  cfTcct 
of  reduced  income  njioii  I  lie  ^aeat  numbers  of 
reli^jious,  cliarilable,  and  e<lucatir)nal  institutions 
sui)()ortcd  wlH)lly  or  j)artly  by  invested  funds. 
'Ilic  inmiediate  effect  must  be,  of  course,  to  cur- 
tail tluir  operations.  They  must  discliarge  some 
of  lluir  ein|)loytcs;  they  must  get  along  with 
fewer  surgeons  and  professors,  and  pay  less  to 
those  who  are  retained.  They  must  suffer  im- 
mediately and  directly  in  this  way,  and  they  will 
also  suffer  reintjtely  ami  indirectly  in  another 
way.  The  class  by  whose  liberality  they  are 
principally  enlarged  and  supported  will  no  longer 
be  able  to  keep  up  their  contributions  on  the 
f(jrmer  scale.  Their  income  being  smaller,  they 
must  economize  somehow,  and  they  will  be  com- 
pelled to  restrict  their  benevolence.  Many  of 
them  will  deny  themselves  luxuries  to  which  they 
have  been  accustomed;  some  of  them  will  even 
deny  themselves  comforts  rather  than  relinquish 
the  charities  to  which  they  are  devoted.  But, 
on  the  whole,  the  abilities  of  this  class  being  re- 
duced, as  well  as  its  numbers,  there  can  not  but 
be  a  falling  off  in  the  amount  of  donations  to 
benevolent  purposes.* 

*  The  gifts  and  bequests  for  public  purposes  made  in  amounts 
of  $5,000  and  over  durinp  the  year  iSg6  foot  up,  according  to 
"Appleton's  .\nnual  C)'clopa:dta,"  more  ih.in  $27,000,000.    In  some 


THE    NATURE    OF    PROFITS.  I/I 

These  considerations  may  be  sufficient  to 
show  that  the  Legislature  can  not  reduce  the 
rate  of  interest  without  some  injury  to  labourers 
as  well  as  other  classes.  It  remains  to  inquire 
into  the  rate  of  profit  as  distinguished  from  in- 
terest. Large  business  operations  are  generally 
conducted  to  no  small  extent  with  borrowed 
capital,  and  it  might  at  first  seem  that  a  reduced 
rate  of  interest  would  tend  on  this  account  to 
increase  profits.  But  it  is  not  the  market  rate  of 
interest  that  would  be  reduced  by  governmental 
action.  That  might  remain  the  same,  while  the 
recipients  of  interest  were  amerced  by  legislators. 
Employers,  therefore,  would  have  to  pay  as  much 
as  before  for  the  use  of  capital,  and  if  the  accu- 
mulation of  capital  was  checked  they  might  after 
a  while  have  to  pay  more.  A  tax  on  interest, 
therefore,  might  presently  become  a  tax  also  on 
profits. 

The  immediate  effect  of  a  reduction  of  profits 
must  be  most  severely  felt  by  small  employers, 
whose  profits  amount  to  little  more  than  the  wages 
of  their  labour.  Such  employers  could  no  longer 
make  a  living  by  employing  labourers;  they 
would  have  to  seek  employment  instead  of  offer- 


previous  years  this  sum  has  been  greatly  exceeded,  and  the  figures 
represent  only  a  part  of  what  is  actually  contributed  by  the  benev- 
olent. 


1/2  INOl'STKI  \I.    I  RKKPOM. 

iii^'  it.  In  tlic  case  of  retail  trade,  the  larj^c  c<;- 
taMislinicnts  would  profit  at  the  expense  of  the 
small  ones.  This  truth  is  distinctly  recognised 
by  our  li(|Uor  laws.  The  traffic  is  heavily  taxed 
with  the  j)ur|)osc  and  with  the  result  of  makinp 
it  unprofitable  for  small  dealers  and  driving  them 
out  of  business.  The  same  causes  operate  in 
other  trades.  The  great  shopkeepers  have  many 
advantages  both  in  buying  and  selling,  and  are 
able  to  practise  many  economies  which  are  not 
within  the  power  of  their  little  rivals.  While 
their  rate  of  profit  might  be  reduced,  the  extent 
of  their  transactions  would  be  enlarged,  because 
of  the  increased  number  of  their  customers. 

The  result  of  the  change  would  therefore  be 
to  discourage  men  of  small  means  from  engaging 
in  business  on  their  own  account.  Thus  the  in- 
crease of  wages  at  the  expense  of  profits  tends 
in  this  instance,  as  we  should  expect,  to  increase 
the  number  of  labourers  and  to  decrease  corre- 
spondingly the  number  of  small  capitalists.  We 
do  not  often  hear  it  said  that  justice  requires 
the  suppression  of  this  class  of  capitalists,  but  it 
is  evident  that  we  must  accept  this  conclusion 
if  we  maintain  that  justice  requires  that  wages 
be  increased.  Some  one  must  pay  the  increase, 
and  the  small  capitalist  can  not  escape  paying 
his  share  of  it. 


THE    NATURE    OF    PROFITS.  1/3 

These  conclusions  apply  not  only  to  sm-all 
shopkeepers,  such  as  grocers  and  butchers,  and 
the  host  of  little  merchants  who  buy  goods  and 
sell  them  in  a  form  substantially  unchanged; 
they  apply  equally  to  artisans,  such  as  black- 
smiths, and  shoemakers,  and  bakers,  and  tailors, 
and  upholsterers,  and  numberless  others,  who  ex- 
pend their  labour  and  that  of  their  assistants  in 
changing  the  form  of  the  goods  in  which  they 
deal.  They  are  now  constantly  exposed  to  the 
competition  of  larger  capitalists,  who  are  able  to 
introduce  new  processes  and  better  machines  as 
fast  as  they  appear.  The  advantages  of  produc- 
tion on  a  large  scale  are  in  these  trades  often 
strikingly  manifested.  We  find  that  it  is  more 
economical  in  many  instances  to  discard  our  half- 
worn  coats  or  shoes  and  buy  new  ones  instead  of 
having  the  old  ones  repaired  by  the  tailor  or  the 
cobbler.  The  numbers  of  these  independent 
artisans  have  been  relatively  reduced  by  the  in- 
troduction of  machinery.  They  will  be  still 
further  reduced  if  wages  are  to  be  raised  by  de- 
creasing profits. 

Many  small  farmers  belong  in  the  same  cate- 
gory. They  are  generally  obliged  to  employ  one 
or  two  assistants,  at  least  during  a  part  of  the 
year.  It  has  become  a  saying  among  them,  in 
these   times   of  falling  prices,    that    they   would 


174  INDUSTRIAI.    FKF:r:rK)M. 

like  to  cxcliaiif^c  places  with  their  hired  help. 
The  hired  farm  hand  j^ets  his  hoard  and  his 
waj^cs;  the  farmer  pets  only  his  board.  His 
prolits  ha\e  in  many  cases  entirely  disappeared, 
and  he  keeps  on  farming  only  because  he  can 
not  well  stop.  lUit  he  would  have  to  stop  if  he 
had  to  pay  the  same  amount  for  wages  and  got 
less  i)r(»rit  from  his  farm.  He  could  not  raise 
the  money  to  jiay  these  wages.  As  it  is,  he 
can  hardly  raise  the  money  to  buy  the  improved 
machines  that  play  a  large  part  in  modern  agri- 
culture, and  without  using  which  he  must  quickly 
go  to  the  wall.  If  his  income  is  decreased,  but 
not  his  expense,  he  must  give  place  to  the  farmer 
who  has  the  capital  to  enlarge  his  operations. 
If  he  can  not  afford  to  hire  labour,  he  must  hire 
out  himself.  This  process  is  continually  going 
on,  and  has  by  many  observers  been  deplored; 
but,  according  to  the  theory  under  consideration, 
justice  requires  that  it  be  accelerated. 

The  statement  of  these  results  may  seem  to 
amount  to  little  more  than  saying  that  what 
has  taken  place  in  the  past  will  tend  to  be  re- 
peated in  the  future.  In  our  own  country  the 
existence  of  vast  tracts  of  very  fertile  land,  so 
situated  as  to  be  made  easily  accessible  by  rail- 
ways, has  modified  and  even  arrested  many  eco- 
nomic tendencies.      Now  that  these  land?  have 


THE    NATURE    OF    PROFITS.  1/5 

mostly  passed  into  private  ownership  these  tend- 
encies will  reassert  themselves.  A  declining 
rate  of  profit  will  render  it  more  and  more  neces- 
sary to  concentrate  capital,  and  the  small  capi- 
talist will  find  it  harder  and  harder  to  maintain 
an  independent  position.  While  there  may  be  no 
actual  decrease  in  the  numbers  of  this  class,  there 
will  be  a  relative  decrease  as  compared  with  the 
number  of  labourers.  It  is  idle  to  lament  this, 
and  yet  there  are  many  reasons  why  we  should 
not  expedite  a  change  which  is  attended  with 
many  poHtical  consequences  of  an  unsatisfactory 
and  even  alarming  character.  At  least  we  may 
hesitate  to  adopt  measures  intended  to  carry  this 
change  at  once  to  the  extreme  Hmits  of  its  pos- 
sibility, limits  which  might  under  present  condi- 
tions never  be  reached. 

While  it  is  evident  that  the  general  rate  of 
profit  may  be  reduced  by  Government,  and  that 
the  number  of  independent  employers  will  thus 
be  diminished,  it  does  not  follow  that  all  those 
employers  who  continue  in  business  will  find  their 
gains  decreased.  There  is  in  theory  a  general  rate 
of  profit,  but  in  practice  there  is  an  Infinite  num- 
ber of  particular  rates.  Some  of  them  are  very 
high  and  some  very  low,  and  it  can  not  be  deter- 
mined how  they  will  be  individually  affected.  As 
we  have  seen,  profits  arise  from  the  fact  that  the 


I  7^'  INDUSTRIAL    FRKKDOM. 

abilities  of  niaiikind  ohlain  from  X.'iturc  a  larger 
supply  of  (lcsiral)lc  things  than  is  needed  for  mere 
Mi|)port.  ICxceptionally  high  profits,  therefore, 
are  generally  due  to  cxcej)tional  abilities.  In 
such  cases  the  cost  to  the  community  of  what 
it  receives  is  not  increased.  Indeed,  the  public 
eventually,  if  not  at  once,  makes  a  positive  gain — 
a  gain  that  comes  to  it  without  expense. 

This  truth  is  of  so  much  importance  as  to 
deserve  to  be  illustrated  at  some  length.  It  is, 
of  course,  admitted,  but  it  is  not  fully  appre- 
ciated. No  one  denies  that  he  is  a  public  bene- 
factor who  makes  two  blades  of  grass  grow  where 
one  grew  before;  but  there  is  a  disposition  to 
ignore  what  the  proverb  implies.  Let  us  extend 
it  a  little,  and  observe  the  different  results  ob- 
tained by  the  good  farmer  and  the  bad  farmer. 
They  may  have  farms  of  equal  value  and  equal 
cai)ital,  but  one  manages  to  produce  twice  as 
much  as  the  other.  The  surplus  is  entirely  due 
to  skill,  intelligence,  and  industry;  to  qualities 
which  it  is  of  the  greatest  importance  to  society 
to  encourage.  As  the  direct  result  of  these 
qualities  more  and  better  food  comes  into  exist- 
ence without  any  increased  exertion  on  the  part 
of  the  community.     It  is  all  clear  gain. 

It  is  not  different  in  the  case  of  manufactur- 
ing establishments.     The  man  who  by  improve- 


THE    NATURE    OF    PROFITS.  1/7 

ments  in  machinery,  by  employing  new  proc- 
esses, by  attention  to  the  details  of  business, 
turns  out  an  increased  product,  is  as  much  of  a 
benefactor  as  the  good  farmer.  The  same  is 
true  of  distributing  agencies.  The  merchant 
who  lays  before  his  customers  a  stock  of  well- 
selected  goods  renders  them  a  greater  service 
than  the  one  who  offers  ill-selected  goods.  He 
who  provides  such  an  assortment  as  enables  cus- 
tomers to  supply  their  wants  with  the  least  ex- 
penditure of  time  and  trouble  is  a  benefactor  to 
them.  Those  who  efifect  improvements  in  trans- 
portation, in  communication,  in  exchange,  in  in- 
surance, in  banking,  are  all  engaged  in  adding  to 
the  general  sum  of  wealth.  If  they  kept  the 
whole  of  their  additions  for  themselves  the  com- 
munity would  be  no  poorer;  but  they  can  not 
keep  the  whole  of  them  for  themselves.  The 
farmer  who  increases  his  crops  must  sell  them, 
and  when  there  is  more  to  be  sold  the  price 
falls.  Ability  thus  divides  its  rewards  with  the 
world.  Its  gains  are  due  to  itself,  but  it  can  not 
utilize  them  unless  it  shares  them  with  man- 
kind. 

Who  can  calculate  the  purely  material  gain 
to  our  race  from  the  wonderful  reduction  in  its 
death  rate  that  has  taken  place  in  modem  times. 
Disease  was  formerly  so  much  more  destructive 


178  INDl'STRIAL    FRKKDOM. 

that  wc  may  compare  its  effects  willi  that  of  war. 
lOvery  year  as  many  people  were  swept  away  by 
pestilential  (hseases  as  wonld  have  fallen  in  a 
Moody  campai^ni;  and  these  lives  are  now  saved. 
Their  preservation  is  due  in  a  j^eneral  sense  to  the 
advance  of  science;  hut  it  is  to  he  especially  at- 
tributed to  the  increased  abilities  of  physicians. 
Aithouj^h  wc  do  not  speak  of  their  compensation 
as  profits,  yet  it  is  clearly  of  the  same  nature. 
They  save  lives  that  but  for  their  skill  would  be 
lost;  the  abler  of  them  save  lives  that  ordinary 
physicians  can  not  save.  It  has  happened  to 
nianv  to  be  bereaved  of  children  or  friends  be- 
cause of  the  absence  of  professional  skill.  What 
figure  will  they  name  as  the  additional  recom- 
pense which  they  would  have  paid  for  professional 
skill  that  would  have  saved  these  lost  lives? 

What  would  be  the  value  to  the  German  na- 
tion, it  has  been  asked,  of  another  Moltke  when 
the  next  war  breaks  out?  Might  he  not  be  cheap 
at  a  hundred  million  dollars?  Might  he  not  be 
worth  a  national  debt?  Such  instances  as  these 
illustrate  the  necessary  connection  between  great 
accumulations  of  wealth  and  great  profits.  When 
a  man  is  struggling  to  defend  a  fortune  against 
a  dangerous  claimant  he  wants  a  lawyer  that 
can  win.  The  services  of  a  hundred  incompe- 
tent  attornevs  would  be  worse  than  worthless. 


THE    NATURE    OF    PROFITS.  1/9 

When  it  is  a  question  between  total  ruin  and  a 
large  fee,  it  is  folly  to  hesitate.  The  principle 
is  the  same  in  the  case  of  great  business  enter- 
prises. An  able  man  may  make  the  enterprise 
a  splendid  success;  an  incapable  man  may  not 
only  make  no  profits,  but  lose  the  principal. 
Where  losses  may  be  on  a  large  scale,  it  pays  to 
insure  against  them  by  employing  the  highest 
talent  that  can  be  procured,  and  the  resulting 
competition  among  owners  of  capital  to  secure 
this  talent  raises  its  compensation  to  high  fig- 
ures. 

The  truth  is  only  disguised  when  men  con- 
duct their  affairs  with  their  own  capital.  If  they 
have  exceptional  capacity,  they  earn  its  compen- 
sation in  the  shape  of  exceptional  profits,  whether 
the  capital  belongs  to  them  or  to  others.  And  as 
the  services  of  an  able  general  are  worth  more 
in  time  of  war  than  in  peace,  so  the  services  of 
an  able  business  manager  may  be  more  valuable 
when  profits  are  reduced  than  when  they  are  in- 
creasing. A  reduction  in  the  general  rate  of 
profit,  therefore,  may  sometimes  result  in  in- 
creasing those  particular  rates  that  were  highest. 

During  recent  years  a  strong  tendency  to 
combine  has  prevailed  among  establishments 
manufacturing  staple  articles  of  consumption, 
and  the  ears  of  the  public  have  been  deafened 


l80  INDUSTRIAL    IKJIDoM. 

with  outcries  a^'ainst  these  comljinatious,  wliicli 
are  ij^uorantly  called  trusts.  'Ihe  j^round  of  these 
coiuplaiuts  has,  of  course,  heeii  the  supposed 
ninnopolies  created.  Those  wiio  cfTcctcd  these 
coinhinations  undouhtedly  cxj)ccted  thereby  to 
increase  their  profits — a  result  which  has  been 
attained  in  dilTercnl  degrees,  and  in  some  cases 
not  at  all.  \\  here  the  expected  profits  have  been 
realized  there  is  remarkably  little  evidence  that 
the  public  has  been  subjected  to  any  additional 
expense.  Few  people  are  aware  of  the  very  great 
charges  incurred  by  manufacturers  in  disposing 
of  their  products.  These  charges  are  frequently 
greater  than  the  cost  of  production.  The  ex- 
pense of  advertising  is  enormous;  it  is  estimated 
at  a  hundred  millions  a  year.  So  far  as  staple 
articles  of  established  use  and  (juality  are  con- 
cerned, money  spent  in  advertising  is  wasted. 
No  housekeeper  now  needs  to  consult  manufac- 
turers' advertisements  before  supplying  herself 
with  granulated  sugar;  no  grocer  is  under  any 
such  necessity.  But  if  there  were  many  sugar 
companies,  they  would  spend  immense  sums  in 
advertising  their  respective  products,  and  wheth- 
er this  expense  fell  on  the  producer  or  the  con- 
sumer, it  would  increase  the  cost  of  production. 
It  is  in  evidence  that  one  of  the  concerns  that 
united  to  form  the  American  Tobacco  Company 


THE    NATURE    OF    PROFITS.  l8l 

had  spent  $700,000  for  advertising  in  a  single 
year.  After  consolidation  this  expense  was 
saved;  and  if  all  the  concerns  made  similar  sav- 
ings, the  total  would  have  been  sufficient  to  pay 
all  the  dividends  of  the  new  company. 

As  the  reduction  of  advertising  to  sober  busi- 
ness announcement  is  a  clear  gain,  so  the  saving 
attained  by  dispensing  with  a  horde  of  soliciting 
agents  is  altogether  beneficial.  Special  lines  of 
goods  and  novelties  may  need  to  be  brought  to 
the  attention  of  consumers,  and  in  such  cases 
there  may  be  no  opportunity  for  combination. 
But  it  seems  absurd  that  the  community  should 
be  called  on  to  support  a  large  number  of  men 
engaged  in  calling  attention  to  the  different  es- 
tablishments making  a  staple  article  of  consump- 
tion. In  the  case  of  sugar,  as  we  just  now  ob- 
served, every  consumer  and  every  grocer  knows 
exactly  what  the  article  costs  and  what  it  can  be 
sold  for.  If  there  were  many  competing  estab- 
lishments, every  one  would  have  to  be  on  the 
watch  lest  he  pay  more  than  others.  As  the 
saving  in  expense  to  the  producer  is  very  great, 
so  the  saving  in  friction  and  anxiety  to  the  buyer 
is  enormous.  To  effect  this  saving  of  money  and 
time  and  worry  is  to  confer  as  great  a  benefit 
upon  society  as  to  invent  a  new  process  of  manu- 
facture.    As  the  inventor  is  allowed  to  reward 


l82  INDUSTHIAI.    FKI.I.Dn.M. 

liinisclf  by  cxccplional  f^ains,  so  tlic  business  man- 
ager who  institutes  economics  in  the  <Hstril)ution 
of  goods  may  claim  a  right  to  ajiproj^riate  the 
resulting  benefit. 

Such  aj)i)roi)riation,  we  have  seen  reason  to  be- 
lieve, will  be  of  a  temporary  character,  and  the 
public  will  after  a  time  share  in  the  prcjfits  arising 
from  these  improvements.  It  is  not  improbable 
that  the  public  is  now  getting  this  benefit  to  a 
considerable  extent.  Some  of  the  industrial  com- 
binations have  been  obliged  to  sell  their  goods 
at  such  low  prices  as  to  have  become  insolvent. 
The  most  famous,  or  perhaps  we  should  rather 
say  the  most  odious  of  them,  the  Standard  Oil 
Combination,  has  made  its  profits  while  greatly 
reducing  its  prices.  Some  attempts  have  been 
made  to  prove  that,  although  the  prices  of  the 
goods  manufactured  by  these  concerns  have  been 
on  the  w^hole  reduced,  yet  they  have  not  been 
reduced  so  much  as  they  might  have  been  in  view 
of  the  increase  of  production  and  the  improve- 
ment in  its  methods.  This  may  very  likely  be 
true,  but  it  is  hardly  suflFicient  to  justify  the  vio- 
lent denunciation  to  which  these  corporations 
have  been  subjected.  If  it  shall  eventually  prove 
that  their  monopoly  results  in  decreased  cost  of 
goods  to  the  consumer,  it  will  be  impossible  to 
maintain  that  it  is  unjust.     If  it  shall  appear  that 


THE    NATURE    OF    PROFITS.  1 83 

their  profits  are  kept  up  at  such  a  figure  as  to 
increase  the  cost  of  goods  to  an  appreciable  ex- 
tent, the  charge  of  injustice  would  be  sustained. 
Up  to  the  present  time  it  is  impossible  to  deter- 
mine what  the  ultimate  result  will  be;  but  there 
is  reason  to  believe  that  the  injustice  hitherto 
suffered  by  the  public  exists  principally  in  the  im- 
aginations of  writers  for  the  sensational  press, 
in  the  representations  of  disappointed  competi- 
tors, and  in  the  declamations  of  legislators  greedy 
for  blackmail. 

We  have  seen  that  a  reduction  of  the  general 
rate  of  profit  tends  to  decrease  the  number  of 
small  employers.  It  appears  to  be  a  somewhat 
hasty  assumption  that  an  increase  of  the  excep- 
tionally high  profits  due  to  business  ability  in- 
creases this  tendency.  The  common  accusation 
brought  against  monopolies  is  that  they  raise 
the  prices  of  their  products.  If  they  do,  since  there 
are  no  complete  monopohes,  they  benefit  their 
small  competitors.  This  conclusion  is  so  ob- 
vious that  the  more  intelligent  among  the  de- 
nouncers of  monopoly  pursue  the  other  line  of 
complaint.  In  the  opinion  of  a  majority  of  the 
justices  of  the  United  States  Supreme  Court, 
combinations  of  capital  may  "  temporarily,  or 
perhaps   permanently,    reduce   the   price    of   the 

article  traded  in  or  manufactured,  by  reducing 
13 


184  INDUSTRIAF,    I  UKKIiOM . 

I  he  expense  inseparable  from  the  runninfj  of 
many  (lifTcrcnt  companies  for  the  same  purpose. 
Trade  or  eonimerce  under  those  circumstances 
may  nevertlieless  be  badly  and  unfortunately  re- 
strained by  driving  out  of  business  the  small  deal- 
ers and  worthy  men  whose  lives  have  been  spent 
therein,  and  who  mifj^ht  be  unable  to  readjust 
themselves  to  their  altered  surroundings." 

The  Court  recognises  the  fact  that  the  intro- 
duction of  machines  and  steam  interrupted  tra- 
ditional habits  of  labour,  and  that  the  change 
from  stagecoaches  to  railroads  threw  men  out 
of  employment.  This  is  described  as  the  inevita- 
ble accompaniment  of  change  and  improvement. 
But  it  is  "  wholly  different  when  such  changes 
arc  effected  by  combinations  of  capital,  whose 
purpose  in  combining  is  to  control  the  produc- 
tion or  manufacture  of  any  particular  article  in 
the  market,  and  by  such  control  dictate  the  price 
at  which  this  article  shall  be  sold,  the  effect  being 
to  drive  out  of  business  all  the  small  dealers  in  the 
commodity,  and  to  render  the  public  subject  to 
the  decision  of  the  combination  as  to  what  price 
shall  be  paid  for  the  article.  In  that  light  it  is 
not  material  that  the  price  of  an  article  may  be 
lowered.  It  is  in  the  power  of  the  combination 
to  raise  it." 

According   to   this   theory  of  political   ccon- 


THE    NATURE    OF    PROFITS.  1 8$ 

omy  it  is  for  the  public  interest  that  the  cost 
of  articles  of  consumption  should  not  be  reduced 
if  the  persons  who  effect  the  reduction  in  cost 
effect  it  with  that  purpose  in  view.  If  they  re- 
duce the  cost  to  the  consumer,  they  ruin  their 
competitors,  who  can  not  make  a  living  unless 
they  charge  higher  prices;  and  the  fact  that  they 
can  reduce  cost  shows  that  they  can  "  dictate  " 
prices.  It  is  not  easy  to  follow  the  distinction 
made  by  the  court  between  those  combinations 
of  capital  that  in  the  first  place  applied  steam 
to  manufacturing  and  transportation,  and  those 
which  apply  improved  chemical  or  electrical 
processes  or  more  economical  methods  of  any 
kind  at  the  present  day.  We  can  not  listen  seri- 
ously to  the  assertion  that  Arkwright  and  Ste- 
phenson had  no  idea  of  reducing  the  cost  of  pro- 
duction, while  Vanderbilt  and  Edison  and  Besse- 
mer have  been  animated  with  this  guilty  purpose. 
It  is  absurd  to  maintain  that  any  combination  of 
capital  can  arbitrarily  raise  prices  to  any  given 
figure.  There  may  be  a  temporary  "corner"; 
a  very  powerful  combination  attempted  one  in 
copper  a  few  years  ago,  and  incurred  thereby  the 
most  ruinous  losses.  But  it  is  palpably  not  for 
the  interest  of  a  concern  engaged  in  production 
or  transportation  to  attempt  anything  of  this 
kind.     It  is  apt  to  result  eventually  in  loss. 


l86  INDUSTKI.M.    I  Ri;i:i)()M, 

it  is  tiot  t(Kj  nuicli  to  say  tliat  no  monopoly 
lias,  or  can  have,  the  power  over  j>riccs  asserted  to 
exist  by  the  Supreme  Court.  There  arc  no  com- 
plete moiKtpolies.  There  are  always  existing 
comi)etitors;  there  are  more  potential  com- 
petitors. Size  is  an  element  of  weakness  as 
well  as  strength  in  industrial  comi)etition.  The 
absolute  loss  to  the  American  Sugar  Company 
in  .1  war  of  prices  with  independent  refineries 
would  be  far  greater  than  that  of  its  antagonists. 
It  can  only  inflict  loss  by  reducing  its  prices,  and 
only  in  an  emergency  would  it  be  politic  to  sac- 
rifice great  i)rofits  in  order  to  prevent  competi- 
tion. A  small  concern  may  have  very  powerful 
backers;  it  can  say  to  a  great  concern,  "  Hands 
off,  or  we  will  make  it  cost  you  millions  to  thou- 
sands that  we  shall  lose."  This  truth  has  come 
to  be  understood  in  the  case  of  railroads.  The 
strong  roads,  it  is  conceded,  are  at  the  mercy 
of  the  weak  ones.  The  weak  ones  know  it,  and 
arc  always  trying  to  increase  their  profits  by 
frightening  the  big  roads  into  concessions  by 
threats  of  lower  prices  or  rates.  A  man-of- 
war  is  a  bigger  mark  than  a  torpedo  boat.  It 
may  be  able  to  sink  its  little  antagonist,  but  if 
its  own  hull  may  be  pierced  in  the  process  it  will 
be  prudent  not  to  invite  battle. 

The  imagination  of  the  Supreme  Court  is  ex- 


THE    NATURE    OF    PROFITS.  1 8/ 

cited  by  the  idea  that  a  combination  of  capitalists 
may  possess  a  complete  monopoly  and  hold  a 
whole  people  at  its  mercy.  Were  such  a  mo- 
nopoly to  come  into  existence  it  would  be  com- 
pletely at  the  mercy  of  the  people.  Let  us  sup- 
pose that  the  sugar-refining  business  was  entirely 
in  the  hands  of  one  concern.  In  such  a  case 
Congress  could  extinguish  it  in  a  day.  It  could 
remove  the  duty  on  refined  sugar  and  raise  that 
on  raw  sugar,  and  every  American  refinery  would 
have  to  close.  Congress  can  not  do  this  now 
without  destroying  a  number  of  independent  re- 
fineries. In  other  words,  it  can  not  crush  this 
monstrous  monopoly,  because  there  is  no  mon- 
strous monopoly  to  crush.  No  patriot  need  be 
alarmed  at  the  thought  that  his  country  may  be- 
come the  victim  of  absolute  industrial  despotism. 
Our  great  manufacturing  combinations  do  not 
possess  the  powers  attributed  to  them,  and  if 
they  did  it  would  be  madness  to  exercise  them. 
They  do  not  court  ruin,  and  they  know  how  vul- 
nerable they  are. 

Whether  these  conclusions  are  sound  or  not 
is  really  immaterial  in  our  present  inquiry.  It 
is  beyond  question  that  workmen  employed  by 
great  combinations  of  capital  are,  on  the  whole, 
at  least  as  well  paid  as  those  in  private  employ. 
It  is  admitted  that  these  combinations  reduce  the 


1 88  INDUSTRIAL    rKI.KDOM. 

cost  of  prcxlucinj;  floods.  If  they  increase  tlieir 
product  they  employ  more  hihourers.  If  tliey 
I«»\v<.r  its  price  they  benefit  all  labourers  who  con- 
sume the  product;  and  if  they  drive  inefficient 
producers  out  of  the  business,  it  must  be  remem- 
bered that  the  workmen  employed  by  such  i)ro- 
ducers  are  the  worst  off  of  their  class.  Hence 
to  confiscate  the  exceptional  profits  due  to  the 
combination  of  a  number  of  competinir  concerns 
untler  one  manap^ement  may  tend  rather  to  de- 
crease than  to  increase  the  compensation  of  la- 
bourers. 


CHAPTER  XII. 

POSSIBLE    EFFECT    ON    WAGES    OF    REDUCING    THE 
RATE    OF    PROFIT. 

The  fact  that  our  progressive  accumulation 
of  wealth  has  tended  to  lessen  gradually  the  rate 
of  interest  is  not  of  a  nature  to  deter  men  from 
saving.  The  result  is  too  remote  to  influence 
present  action.  It  is  not  generally  understood, 
nor  would  it,  perhaps,  be  considered  if  it  were. 
It  threatens  no  immediate  loss,  no  diminution 
of  capital,  no  impairment  of  security.  At  any 
moment  the  investor  feels  that  he  may  with- 
draw his  principal  and  spend  it  if  he  is  not  con- 
tent with  his  income.  What  is  most  important 
of  all,  he  thinks  that  the  decline  of  interest  is  due 
to  the  operation  of  natural  forces.  It  has  taken 
place  because  property  has  been  protected  and 
profits  increased  under  modern  methods  of  gov- 
ernment. It  signifies  that  freedom  of  contract 
has  been  recognised,  that  production  has  been 
enlarged,  that  labourers  have  received  a  continu- 
ally increasing   compensation,   and   have   had   a 

189 


190  INDUSTRIAL    FRKKDOM. 

greater  .surplus  above  ihcir  necessary  require- 
ments. It  is  on  many  accounts  the  most  encour- 
aj^inj^  plienomenon  in  tlie  present  situation,  just 
because  it  has  been  br()U}.,'ht  about  under  the 
coiKhtions  liere  described.  If  it  suj^jjests  to  the 
far-si};hted  investor  that  he  may  not  hope  for 
such  j^ains  hereafter  as  lie  has  had  in  the  past, 
il  tells  the  labourer  that  in  the  future  wages  may 
be  higher,  life  and  property  more  secure.  If  his 
savings  will  be  less  productive,  they  will  be  easier 
made;  if  his  interest  is  diminished,  it  is  because 
his  principal  is  increased. 

'ilio  proposal  to  anticipate  a  future  stage  of 
development  by  means  of  compulsory  laws  as- 
sumes not  only  that  this  conceivable  stage  of 
progress  is  certain  to  be  reached,  but  also  that 
it  can  be  reached  by  establishing  conditions  dif- 
ferent from  those  under  which  progress  has  hith- 
erto taken  place.  In  order  to  comprehend  fully 
all  that  is  involved  in  this  assumption,  we  need 
to  examine  more  particularly,  even  at  the  cost 
of  some  repetition,  the  manner  in  which  our  pres- 
ent wealth  has  been  created  and  the  motives 
which  have  influenced  the  classes  participating 
in  its  creation.  W'c  know  in  a  general  way  that 
owing  to  greater  knowledge  of  the  powers  of 
Nature  and  increased  skill  in  their  application,  to- 
gether with  enlarged  capital  and  improved   la- 


WAGES    MAY    FALL    WITH    PROFITS.  IQI 

bour,  production  has  become  far  more  effective. 
We  know  that  the  chief  motive  for  increased  pro- 
duction is  the  desire  for  gain  or  profit;  and  we 
know  that  while  the  share  of  this  gain  appro- 
priated by  capital  has  been  absolutely  greater, 
it  has  been  relatively  less.  The  general  rate  of 
profit  has  probably  declined;  the  general  rate  of 
wages  has  certainly  increased.  Let  us  look  at 
these  movements  in  detail. 

In  the  first  place,  we  may  remark  that  the 
advance  that  has  taken  place  in  the  general  rate 
of  wages  has  been  so  gradual  as  to  have  escaped 
notice.  To  this  day  one  may  hear  workmen 
refer  regretfully  to  the  high  wages  received  dur- 
ing the  civil  war,  although  it  is  well  established 
that  these  wages  were  higher  only  when  reck- 
oned in  inflated  currency.  The  great  mass  of 
investors  are  ignorant  of  this  advance  and  of  the 
relation  which  they  bear  to  it.  Every  one  who 
saves  his  money  and  deposits  it  in  a  bank  is 
contributing  his  mite  to  the  fund  available  for 
the  payment  of  workmen,  and  is  therefore  doing 
what  he  can  to  raise  their  wages;  but  he  has  no 
such  intention.  Investors  may  find  their  income 
declining,  but  if  they  are  aware  that  the  higher 
wages  paid  workmen  contribute  to  this  result, 
they  do  not  feel  that  they  have  been  amerced 
for  that  purpose.     Were  they  told  that  they  were 


192  INinrSTttlAL    FREKDOM. 

under  ()bli;^ali(jii  to  accept  a  lower  rate  of  inter- 
est or  j)ront  in  order  that  wapcs  mij^ht  be  in- 
creased, tlicir  fecliiif^s  would  be  very  different 
from  what  they  are  now.  The  view  of  justice  in- 
volved in  this  oblij^'ation  mij^ht  not  commend 
itself  to  them  at  all.  Tliey  mi^ht  regard  it  as 
the  height  of  injustice,  and  their  attitude  would 
be  a  very  important  element  in  the  situation.  If 
the  supposed  claim  of  justice  can  be  enforced  only 
by  the  use  of  measures  that  will  alarm  or  exas- 
perate the  possessors  of  wealth,  its  purpose  may 
be  defeated.  If  such  people  become  convinced 
that  they  are  the  victims  of  oppression  and  spolia- 
tion, they  may  resort  to  measures  that  will  result 
in  withdrawing-  their  property  to  a  greater  or  less 
extent  from  productive  employment.  If  we  can 
not  enforce  our  supposed  requirements  of  justice 
without  this  result,  there  is  nothing  for  us  to  do 
but  to  confess  that  we  have  been  mistaken  in 
these  requirements. 

No  mere  assertion,  or  bluster,  however,  is 
sufficient  to  prove  this  point.  It  is  very  easy  to 
condemn  this  measure  or  that  on  the  ground  that 
it  will  discourage  saving,  and  thereby  lessen  pro- 
duction. But  we  know  very  well  that  some  ac- 
cuniulaticMi  will  take  place  without  the  induce- 
ment of  profit  or  interest.  !Macaulay  tells  us 
that  the  father  of  Pope,  the  poet,  who  retired 


WAGES    MAY    FALL    WITH    PROFITS.  193 

from  business  in  the  city  about  the  time  of  the 
Revolution,  carried  to  a  retreat  in  the  country 
a  strong  box  containing  nearly  twenty  thousand 
pounds,  and  took  out  from  time  to  time  what  was 
required  for  household  expenses;  and  it  is  highly 
probable  that  this  was  not  a  solitary  case.  Many 
thrifty  princes  have  stored  up  large  sums  of  gold 
and  silver,  and  in  the  earlier  stages  of  civilization 
hoarding  was  extensively  practised.  It  was  but 
yesterday,  we  may  say,  that  the  French  peasantry 
gave  up  the  practice  of  hiding  silver  in  their 
stockings  or  behind  their  wainscots;  and  the  con- 
stant absorption  of  this  metal  by  Asiatic  peoples, 
which  goes  on  to  this  day,  is  due  to  the  same 
propensity. 

It  does  not  appear,  however,  that  the  exist- 
ence of  such  practices  can  have  any  effect  upon 
the  compensation  of  labourers,  except  to  depress 
it.  The  motive  for  hoarding  is  the  desire  for 
security;  but  the  motive  for  employing  labour 
is  the  desire  of  gain.  These  motives  are  neces- 
sarily in  perpetual  conflict.  If  the  latter  were 
extinguished,  there  could  be  no  reason  given  why 
any  one  should  risk  his  money  in  the  ventures  of 
commerce.  If  he  keeps  it  it  is  safe,  but  if  he 
pays  it  out  in  wages  he  may  lose  it.  Mere  ac- 
cumulation, therefore,  can  never  promote  produc- 
tion or  benefit  labourers.     Some  rate  of  profit, 


194  INDUSTRIAL    FREEDOM. 

however  small,  must  be  allowed,  or  the  employ- 
ment of  labourers  on  any  considerable  scale  would 
cease  altogether. 

It  is  idle  to  attempt  to  determine  the  com- 
parative efTectiveness  of  these  motives.  Many 
persons  enjoy  gambling,  or  what  they  prefer  to 
call  speculation.  The  excitement  derived  from 
I  he  hope  of  great  gain  outweighs  the  fear  of  loss, 
and  they  arc  willing  to  take  chances  even  when 
they  know  that  the  chances  are  against  them. 
While  this  propensity  meets  with  general  disap- 
proval, it  can  not  be  denied  that  it  has  had  much 
to  do  with  the  progress  of  civilization.  We  owe 
an  immeasurable  debt  to  our  inventors;  but  their 
pursuits  are  of  a  highly  speculative  character,  and 
their  discoveries  are  only  brought  into  general 
use  by  the  aid  of  those  who  are  willing  to  risk 
their  money  in  enterprises  whose  success  is  prob- 
lematical. Upon  minds  of  this  character  it  is 
impossible  to  determine  what  would  be  the  effect 
of  a  legislative  reduction  of  the  rate  of  profit.  It 
might  deaden  their  interest  in  speculation,  and 
make  them  appreciate  the  advantages  of  security, 
or  it  might  stimulate  them  to  more  desperate 
ventures.  Nor  is  it  more  possible,  perhaps,  to 
determine  how  the  interests  of  the  community 
will  be  affected  by  their  action.  But  we  may  rea- 
sonably  conclude   that,   as   the   prospect   of  in- 


WAGES    MAY    FALL    WITH    PROFITS.  IQS 

creased  gain  is  known,  as  a  rule,  to  stimulate  en- 
terprise, so  the  prospect  of  diminished  profit  will 
have  the  opposite  tendency,  even  in  the  case  of 
the  more  venturesome. 

As  to  those  who  do  not  directly  employ  la- 
bourers with  their  capital,  it  is  evident  that  the 
number  preferring-  a  moderate  return,  with  se- 
curity, to  the  uncertain  chances  of  speculation 
is  very  large.  This  is  indicated  roughly  by  the 
extent  of  those  forms  of  investments  which  are, 
on  their  face  at  least,  not  speculative.  To  a 
great  extent  the  buyers  of  real  estate,  and  espe- 
cially the  holders  of  bonds  and  mortgages,  may 
be  regarded  as  generally  investing  their  savings 
with  an  eye  principally  to  their  security.  The 
efifect  on  this  class  of  a  sudden  fall  in  the  rate 
of  interest  may  vary  according  to  the  extent  of 
their  possessions.  Those  having  the  greatest  in- 
comes would  presumptively  suffer  less  discomfort 
from  their  reduction  than  those  having  much 
smaller  ones.  This  is  not  altogether  a  matter 
of  conjecture,  since  many  large  estates  are  known 
to  be  invested  in  those  "  securities  "  that  pay  the 
lowest  interest.  A  sudden  fall  in  this  rate  might 
in  such  cases  have  little  efifect  on  accumulations 
already  in  existence.  The  principal  would  be 
kept  intact,  although  the  income  was  reduced. 

But  the  same  misfht  not  be  true  of  future 


1^6  INDUSTRIAF.    I  RKEUOM. 

accuimilations.  Wealthy  persons  mi^lit  feel  that, 
after  making  a  sufl'icicnt  provision  for  their  ordina- 
rv  re(iuiremcnts,it  was  hardly  worth  while  to  econ- 
omize further.  Before  the  reduction  of  interest 
their  income  was  sufficient  to  enable  them  to 
live  on  a  certain  scale  and  to  save  something  as 
well.  Now,  although  their  principal  is  undimin- 
isheil,  their  income  is  not  sufficient  to  enable 
them  to  save  anything  unless  they  reduce  their 
scale  of  living.  Some  persons  would  undoubt- 
edly, under  such  circumstances,  reduce  their  ex- 
penses, but  others  would  not.  Penurious  pco- 
I)le  and  those  having  children  or  other  relatives 
for  whom  they  wish  to  provide  would  be  included 
in  the  former  class;  more  generous  livers  and 
those  under  no  obligations  to  provide  for  others 
would  constitute  the  second.  It  is  at  all  events 
possible  that  a  somewhat  diminished  rate  of  ac- 
cumulation would  result,  for  the  income  out  of 
which  savings  were  made  would  be  smaller. 

Hardly  any  one  will  deny  that  a  sound  condi- 
tion of  industry  may  be  more  important  to  la- 
bourers than  a  rise  in  wages;  nor  can  it  be  denied 
that  wages  have  to  be  from  time  to  time  re- 
duced in  particular  trades  in  order  that  employ- 
ers may  not  abandon  them.  Any  forced  or  arti- 
ficial advance  in  wages,  although  apparently  a 
present  gain  to  labourers,  may  thus  be  more  than 


WAGES    MAY    FALL   WITH    PROFITS.  IQ/ 

balanced  by  future  losses.  The  apprehension  is 
constantly  felt  in  England  that  her  trade  will 
suffer  from  the  competition  of  countries  where 
the  rate  of  wages  is  lower.  Her  industries  are 
dependent  on  the  supply  of  coal,  and  the  miners' 
wages  have  sometimes  been  raised  to  a  point  that 
made  some  coal  mines  unprofitable.  The  high 
price  of  coals  thus  caused  reduced  the  profits 
of  other  industries  to  such  an  extent  as  to  affect 
trade.  In  this  way  a  general  reduction  of  wages 
followed,  either  in  the  shape  of  reduced  rates  or 
diminished  employment. 

Such  conditions  impair  the  security  of  the 
savings  of  labourers.  Failures  take  place,  mort- 
gages are  foreclosed,  credit  is  contracted.  Some 
capital  is  thus  lost,  and  more  lies  idle  on  account 
of  apprehension.  Hardly  any  member  of  a  mod- 
ern industrial  society  can  gain  in  one  direction 
without  losing  in  another,  unless  the  whole  com- 
munity gains.  And  this  community  of  interests 
is  bound  up  with  continuity  of  development  and 
progress.  Any  disturbance  of  the  social  order 
is  propagated  throughout  society.  The  very 
apprehension  of  disturbance  is  prejudicial;  it 
is  not  confined  in  its  effects  to  those  who  feel 
alarm,  but  reaches  all  those  who  may  be  influ- 
enced by  their  action.  To  maintain  that  there 
is  any  resemblance  between  the  results  of  a  grad- 


198  INDUSTRIAL    FRKKDOM. 

ual  decline  of  pnjlUs  through  the  operation  of 
natural  causes  and  the  results  of  a  sudden  decline 
through  laws  destroying  existing  rights  of  prop- 
erty, is  like  maintaining  that  the  fear  of  flcath 
from  old  age  is  like  the  fear  of  being  murdered 
by  a  highway  robber.  Every  one  knows  that 
he  can  take  nothing  out  of  this  world,  and  that 
every  night,  to  use  the  metaphor  of  the  sacred 
poet,  he  pitches  his  tent  a  day's  march  nearer 
home.  Such  thoughts,  however,  do  not  occupy 
his  mind  when  he  is  engaged  in  business,  and 
he  devotes  himself  to  making  a  living  without 
troubling  himself  about  dying.  But  if  he  is 
threatened  with  assault  by  marauders,  his  emo- 
tions are  altogether  different;  and  when  his  prop- 
erty is  attacked  by  those  whom  he  has  regarded 
as  its  natural  guardians,  when  the  law  deprives 
him  of  the  rights  which  it  formerly  guaranteed, 
it  is  scarcely  credible  that  he  should  continue  his 
former  practices  of  accumulation  and  invest- 
ment. 

In  estimating  the  results  of  such  a  change 
as  is  proposed,  we  can  not  confine  ourselves  to 
the  contemplation  of  what  might  be  expected 
to  happen  in  an  isolated  society.  Our  aim  being 
to  establish  a  reign  of  justice,  we  can  not  disre- 
gard the  effect  upon  mankind  of  measures  adopt- 
ed bv  our  own  State.      If  we  could  succeed  in 


WAGES    MAY    FALL    WITH    PROFITS.  I99 

raising  the  wages  of  American  workmen  by  legis- 
lative fiat,  we  could  not  assume  that  we  had 
made  any  advance  toward  justice  without  assur- 
ing ourselves  that  labourers  elsewhere  were  not 
prejudiced.  If  we  were  governed  by  expediency 
this  might  not  be  the  case.  We  might  then  say 
that  we  were  not  our  brothers'  keepers;  that  we 
must  seek  the  welfare  of  our  own  society;  that 
so  long  as  jealousy  and  hatred  prevailed  between 
nations  it  would  be  impracticable  to  realize  the 
ideals  of  the  brotherhood  of  mankind. 

But  we  can  not  say  this  if  we  propose  an  in- 
dustrial revolution  in  the  name  of  justice.  We 
must  look  on  the  world  as  a  whole,  and  its  de- 
velopment as  a  continuous  process.  We  must 
recognise  that  the  institutions  of  one  nation  can 
not  be  changed  without  affecting  other  nations; 
that  the  rewards  of  labour  and  capital  in  one  coun- 
try frequently  have  a  very  close  connection  with 
their  rewards  in  other  countries.  We  must  be 
prepared  to  admit  that  what  is  intended  to  pro- 
mote justice  in  a  particular  case  may  hinder  it 
in  the  world  at  large.  Hence,  unless  we  are  as- 
sured that  our  revolution  is  in  the  Hne  of  the 
world's  progress  we  do  wrong  to  begin  it. 

We  may  find  that  success  in  decreasing  the 
rate  of  profit  in  this  country  is  followed  by  fall- 
ing wages.  To  some  extent  this  might  operate 
14 


200  INDUSTRIAL    IHr.I.DOM. 

to  im|)rovc  the  conditicjii  of  labourers  elsewhere, 
and  the  ends  of  justice  would  tlius  be  measurably 
ait.iiiK'd.  It  is  indeed  conceivable  that  abstract 
justice  may  re(|uire  the  inhabitants  of  a  particu- 
lar rcf^ion  to  sacrifice  themselves  for  the  sake  of 
mankind.  I'.ut  before  destroying  our  own  pros- 
l)(.rity  with  a  view  to  promoting  that  of  the  rest 
of  the  world,  wc  should  require  very  clear  demon- 
stration that  such  a  result  must  follow. 

These  general  observations  are  sufficient  to 
show  that  a  decrease  in  the  rate  of  profit  caused 
by  increased  charges  is  a  very  different  thing  from 
a  decrease  caused  by  the  growth  of  capital,  and 
may  have  very  difTcrcnt  effects  on  wages.  There 
is,  unfortunately,  much  evidence  proving  that 
such  effects  have  been  produced  in  our  own  coun- 
try. We  can  not  define  capital  without  recognis- 
ing the  psychological  element.  It  is  wealth  in- 
tended to  be  used  in  production,  and  the  inten- 
tion of  its  owners  is  subject  to  modification  by 
many  causes.  It  follows  that  the  amount  of  capi- 
tal is  subject  to  very  sudden  and  very  extensive 
fluctuations.  Fixed  capital  may  not  at  first  sight 
seem  capable  of  reduction,  but  to  other  capital 
the  saying  that  riches  have  wings  applies.  Such 
capital  is  not  confined  by  geographical  bounda- 
ries; it  belongs  to  the  world,  and  it  can  go 
whithersoever  its  owners  choose.     If  thev  are  not 


WAGES    MAY    FALL    WITH    PROFITS.  20I 

satisfied  with  the  protection  afforded  in  one  juris- 
diction they  will  seek  another. 

Within  a  few  years  much  capital  owned  in  the 
Eastern  States  has  been  recalled  from  investment 
in  the  West.  So  much  has  been  lost  as  to  make 
investors  apprehensive;  and  the  disposition  of 
legislators  has  not  always  been  so  reassuring  as 
to  make  it  seem  prudent  to  renew  mortgages 
when  they  fell  due.  Probably  much  more  capital 
owned  by  European  investors"  has  been  with- 
drawn from  this  country  altogether.  Under 
normal  conditions  this  country  is  an  importer 
of  capital,  just  as  it  is  an  absorber  of  immigrants. 
The  opportunities  for  the  employment  of  capital 
have  been  very  exceptional.  The  natural  wealth 
of  the  country  is  greater  than  that  of  most 
other  parts  of  the  earth,  and,  what  is  more 
important,  the  protection  of  property  has  been 
better  than  has  been  obtainable  in  other  coun- 
tries of  undeveloped  resources.  Hence  there 
has  been  a  comparatively  steady  and  increasing 
flow  of  capital  hither  from  the  great  reservoirs 
of  Europe.  We  can  normally  employ  perhaps 
several  hundred  million  dollars  of  additional  for- 
eign capital  every  year — that  is  to  say,  we  can 
so  use  this  amount  as  to  make  satisfactory  profits 
for  American  employers,  satisfactory  wages  for 
workmen,   and   satisfactorv   interest   for  foreign 


202  INDUSTKl.M.    1  KKEPOM. 

Ifiidcrs.  The  "  balance  of  trade,"  therefore, 
should  I)C  regularly  against  us.  Tiie  value  of 
our  inij)orts  ought  regularly  to  exceed  that  of 
our  exports. 

I'or  some  years  prior  to  1896  the  value  of 
our  imports  declined,  while  we  exported  much 
gold  and  increased  the  value  of  our  other  ex- 
ports. Immigration  also  declined.  lUit  during 
the  year  1896  this  tendency  became  especially 
marked.  The  value  of  our  exports  is  reported  to 
have  exceeded  that  of  our  imports  by  about 
$325,000,000.  We  imported  some  gold,  and 
there  were  dealings  in  bills  of  exchange  of  very 
exceptional  character;  but,  on  the  whole,  this 
balance  can  have  been  adjusted  in  only  two  ways. 
Either  foreign  owners  of  American  securities  dis- 
posed of  them  in  this  country,  or  American  capi- 
talists made  investments  outside  of  this  country. 
Even  if  we  allow  a  large  sum  for  interest  paid 
on  obligations  to  foreigners,  and  for  the  disburse- 
ments of  Americans  abroad,  there  is  a  difference 
that  can  l)e  explained  only  by  the  withdrawal 
of  capital  from  investment  here. 

The  attention  of  the  public  is  not  invited  to 
transactions  of  this  kind.  The  long-headed  men 
who  look  far  forward  in  securing  the  interests 
of  those  dear  to  them  are  not  in  the  habit  of 
disclosing   their   plans.     They  do   not   lay   bare 


WAGES    MAY    FALL    WITH    PROFITS.  203 

all  their  secrets  in  interviews  with  newspaper  re- 
porters. But  although  they  can  conceal  their 
action  as  individuals,  they  can  not  altogether 
hide  its  collective  results.  \Ye  know  that  capi- 
tal has  to  some  extent  gone  out  of  the  coun- 
try, and  we  know  that  our  prosperity  has  hith- 
erto depended  on  its  coming  into  the  country. 
It  may  not  be  true  that  six  hundred  millions,  or 
even  three  hundred  millions,  of  foreign  capital 
that  would  under  former  conditions  have  been 
invested  in  this  country,  have  not  been  invested 
here.  But  it  is  true  that  capital  has  proved  its 
power  of  taking  flight,  and  it  is  also  true  that 
the  result  has  been  to  reduce  the  compensation 
of  American  workmen. 

The  idea  that  fixed  capital  can  not  be  re- 
duced is  incorrect.  We  are,  as  has  been  pointed 
out,  a  growing  country,  needing  continually 
larger  fixation  of  capital.  But  the  additional 
investment  is  the  voluntary  act  of  capitalists. 
They  will  not  make  it  if  they  think  they  will  lose 
it;  they  will  be  particularly  reluctant  if  they 
think  they  may  lose  it  by  confiscation.  To  cease 
to  add  to  our  fixed  capital  is  to  effect  a  relative 
reduction  in  its  amount;  and  it  is  perfectly  feas- 
ible to  reduce  its  absolute  amount.  Several 
hundred  million  dollars'  worth  of  buildings  is  an- 
nually consumed  by  fire.     It  is  optional  with  the 


204  INDUSTRIAF.    FRKKDOM. 

owners  to  rchiiild;  if  tlicy  ^vi  h..  j>r(»rit  in  it,  they 
will  cMiij)U)v  what  they  j^ct  from  the  insurance 
cnnipaiiics  in  other  ways. 

Perhaps  an  c(|nal  vahie  annually  disappears  in 
various  forms  of  deterioration.  Pasture  is  over- 
run with  bushes;  meadows  "  run  out  ";  barns 
and  houses  decay.  Manufacturing  concerns 
fmd  that  it  is  better  to  ^Mve  up  operating  some 
of  their  mills,  or  not  to  renew  some  of  their  ma- 
chinery as  it  wears  out.  Even  railroads  are 
sometimes  abandoned.  There  are  hundreds  of 
miles  of  railroad  that  would  be  abandoned  did 
not  the  owners  hope  by  putting  in  more  capital 
to  secure  some  eventual  return.  When  they 
have  thrown  enough  good  money  after  the  bad, 
they  give  up  hoping,  and  the  unprofitable  enter- 
prise collapses.  Some  few  shreds  and  tatters  of 
the  capital  that  had  been  fixed  in  it  may  be  saved; 
a  bankrupt  railroad  may  earn  its  operating  ex- 
penses. But  there  is  a  partial  loss,  if  not  a 
total  loss,  and  there  may  be  enough  partial  losses 
to  diminish  llie  total  amount  of  fixed  capital. 

As  we  have  pointed  out.  whatever  charges  are 
imposed  on  fixed  capital  must  be  paid  out  of  the 
income  produced  by  that  capital.  It  is  unfor- 
tunately beyond  dispute  that  during  the  last  few 
years  railroads  have  met  reductions  of  income  by 
reductions  of  wacrcs.     Thcv  have  either  reduced 


WAGES    MAY    FALL    WITH    PROFITS.  205 

the  rate  of  wages  or  the  number  of  men  em- 
ployed, or  both.  We  are  justified  in  conckiding 
that  where  the  return  upon  investments  of  fixed 
capital  is  materially  reduced,  the  amount  of  cir- 
culating capital  applied  in  connection  with  fixed 
capital  will  also  be  reduced,  and  that  the  gross 
if  not  the  proportional  share  of  labourers  will 
be  affected  by  the  reduction.  Railroad  mana- 
gers are  generally  ambitious  and  optimistic; 
banking  houses  are  blinded  by  the  desire  to  make 
commissions;  but  prudent  investors  are  not 
Hkely  to  make  further  investments  on  any  large 
scale  in  new  railroads,  if  there  is  reason  to  ex- 
pect that  the  rate  of  profit  on  such  investments 
is  to  be  reduced. 

Every  year  a  number  of  men  engaged  in  busi- 
ness die,  and  a  number  fail.  Under  ordinary  con- 
ditions a  greater  number  take  the  place  of  those 
that  drop  out.  They  do  this  with  the  expecta- 
tion of  profit;  but  if  they  can  form  no  such  ex- 
pectation they  will  abstain  from  new  ventures. 
In  other  words,  the  amount  of  capital  actively 
employed  will  be  reduced,  and  unless  the  number 
of  labourers  is  correspondingly  reduced  the  rate 
of  wages  can  hardly  be  maintained.  But  to  re- 
duce the  number  of  labourers  is  a  slow  process, 
and  a  very  distressing  process.  In  this  country 
a  certain  degree  of  reduction  is  quickly  accom- 


2r/)  INDtTSTRIAL    rRRFDOM. 

plislicd  !)>'  clu-il<iii};  llu-  itillux  of  immigrants; 
Imt  even  this  relief  is  not  ciu)uj;li,  in  times  when 
(limiiiislied  profits  arc  anticipated,  to  prevent 
large  numbers  of  native  workmen  from  being 
thrown  out  of  work. 

Our  recent  experience  certainly  furnishes  am- 
ple i)roof  of  the  proposition  that  the  anticipation 
of  (liininislicd  profit  caused  by  legislative  action 
can  reduce  not  only  the  amount  of  capital  active- 
ly employed,  but  also  the  proportion  applied  to 
tiic  payment  of  wages.  Investors  have  appre- 
hended that  Congress  might  pass  laws  affecting 
the  standard  of  value  to  such  an  extent  that  they 
might  not  recover  the  value  with  which  they  had 
parted.  If  these  things  are  done  in  a  green  tree, 
what  shall  be  done  in  a  dry?  If  a  feeling  of  un- 
certainty as  to  the  return  of  investments  has  pro- 
duced such  disastrous  consequences  to  labourers, 
what  will  be  the  effect  of  a  certainty  of  dimin- 
ished returns  intentionally  caused  by  legislative 
fiat? 

To  sum  u])  the  argument,  we  find  that  it  is 
perfectly  possible,  as  this  country  knows  to  its 
cost,  for  legislators  to  decrease  the  rate  of  profit 
and  the  rate  of  wages  at  the  same  time.  It  is 
also  possible,  although  our  experience  in  this  di- 
rection is  much  more  limited,  for  legislators  to 
increase  both  profits  and  wages.     The  fact  that 


WAGES    MAY    FALL    WITH    PROFITS.  20/ 

wages  are  necessarily  paid  out  of  previously  ac- 
quired income  by  the  voluntary  appropriation  of 
some  part  of  this  income  to  their  payment,  con- 
stitutes the  great  obstacle  to  their  compulsory 
increase.  The  natural  result  of  a  decreased  rate 
of  profit  is  a  decreased  rate  of  wages.  This  tend- 
ency may  be  overcome;  it  has  been  overcome 
during  a  considerable  part  of  the  century  now 
drawing  to  its  close.  But  it  has  been  overcome 
by  a  very  extraordinary  cheapening  of  the 
processes  of  production  and  transportation.  The 
gross  income  of  the  community  was  increased 
to  such  an  extent  that  the  diminution  of  the 
rate  of  profit  did  not  check  the  disposition  to 
accumulate.  The  purchasing  power  of  the 
profits  was  increased  to  such  an  extent  as  to 
counterbalance  their  diminished  rate. 

It  may  be  that  the  cheapening  process  will 
continue.  We  can  not  predict  what  inventions 
and  discoveries  may  yet  be  made.  It  is  thus 
possible  that  wages  may  still  further  increase  at 
the  expense  of  profits.  But  it  by  no  means  fol- 
lows that  our  legislators  can  exercise  the  magni- 
cal  power  of  Bessemer,  or  Bell,  or  Edison.  They 
can  destroy,  but  they  can  not  create.  It  may 
be  admitted  that  their  action  in  reducing  the 
rate  of  profit  may  possibly  be  coincident  with 
the  beneficent  results  of  invention.     This,  how- 


208  INDUSTRIAL    FKKKDOM. 

ever,  would  Ik*  a  matter  of  chance,  and  in  sucli 
event  the  rechiction  ordained  hy  statute  would 
not  he  caused  hy  it,  hut  hy  independent  forces; 
for  if  those  forces  did  ikjI  come  into  j>lay  the  re- 
sult might  not  f(jIlow. 


CHAPTER  XIII. 

PARTICULAR    MEASURES    FOR    REDUCING    PROFITS. 

No  practical  scheme  for  the  compulsory  in- 
crease of  wages  has  ever  been  clearly  formulated, 
and  it  might  at  first  seem  that  none  was  con- 
ceivable. The  contract  of  hiring  being  a  vol- 
untary one,  the  employer  must  be  able  to  enter 
into  it  or  not  at  his  discretion,  and  if  he  is 
obliged  by  law  to  pay  a  higher  rate  of  wages 
than  he  thinks  he  can  afford,  he  will  not  enter 
into  the  contract.  Nevertheless,  we  can  con- 
ceive methods  of  accompHshing  this  result  indi- 
rectly. The  expenditure  for  public  purposes  in 
every  civilized  community  is  a  considerable 
charge  on  the  income  of  its  members,  and  it  is 
not  on  its  face  impossible  to  put  this  charge  on 
the  income  of  certain  classes,  and  to  exempt  the 
income  of  others. 

In  point  of  fact,  something  of  this  kind  is 
thought  to  take  place  now.  The  income  of  la- 
bourers is  their  wages,  and  there  are  no  taxes  as- 
sessed on  wages.     But  it  does  not  follow  that 

209 


2IO  INDUSTRIAL    FREEDOM. 

till')'  arc  exempt  from  taxation  because  tlicy  are 
not  spccilically  taxed.  It  is  {:jenerally  niain- 
I. lined  thai  a  tax  on  imports,  although  collected 
from  the  imi)orters,  is  only  advanced  by  them, 
and  is  really  paid  in  the  end  by  those  who  con- 
snnie  the  goods.  So  an  excise  collected  from 
brewers  and  distillers,  and  the  sellers  of  their 
products,  is  commonly  regarded  as  paid  by  those 
who  use  them.  So  far  as  labourers  consume 
these  taxed  commodities,  they  contribute  to  the 
payment  of  the  taxes  levied  on  them;  and  so 
far  as  they  have  no  other  fund,  they  must  con- 
tribute out  of  their  wages. 

It  is  not,  perhaps,  so  clearly  understood  that 
other  taxes  may  have  similar  effects,  yet  in  many 
cases  this  appears  demonstrable.  During  the 
civil  war  a  tax  was  imposed  on  the  receipts  of 
companies  transporting  passengers;  but  they 
seem  to  have  raised  their  fares  so  as  to  make 
their  passengers  pay  the  tax.  In  the  case  of  the 
street-car  companies,  as  they  could  not  increase 
their  rates  by  the  precise  amount  of  the  tax,  ow- 
ing to  the  impossibility  of  dividing  a  cent  into 
fractions,  they  were  obliged  to  charge  six  or 
seven  cents  instead  of  five  or  six.  Probably  this 
increased  charge  somewhat  decreased  the  num- 
ber of  their  passengers,  and  thus  tended  to  dimin- 
ish their  profits.     But  whether  this  is  true  or  not, 


MEASURES    FOR    REDUCING    PROFITS.  211 

it  is  evident  that  such  passengers  as  they  did 
carry  paid  more  for  the  service  than  before  the 
tax  was  imposed,  and  that  they  therefore  paid 
a  part,  if  not  the  whole,  of  the  tax.  In  fact,  we 
may  lay  down  the  general  rule  that  any  tax  paid 
by  those  engaged  in  a  particular  kind  of  business 
tends  after  a  time,  if  not  at  once,  to  be  shifted 
to  the  shoulders  of  consumers,  or  of  the  commu- 
nity at  large. 

A  tax  on  buildings,  for  example,  may  be 
shifted  by  the  owners  to  the  tenants,  and  by  the 
tenants  to  their  customers,  and  by  their  custom- 
ers to  the  general  public.  Nothing  hinders  the 
owner  from  demanding  an  increased  rent  except 
the  knowledge  that  the  tenant  will  not  pay  it; 
and  in  some  cases  he  knows  that  the  tenant 
must  pay  it.  If,  under  ordinary  conditions,  the 
landlord  raised  the  rent  to  a  figure  beyond  that 
which  gave  him  the  usual  return  on  his  invest- 
ment, other  people  would  put  up  buildings  and 
let  them  at  the  normal  rate,  and  thus  secure 
the  tenants.  But  now  the  increased  rent  only 
corresponds  with  the  increased  tax,  and  new 
buildings  would  be  subject  to  this  tax  just  as  old 
ones  are,  so  that  there  would  be  no  inducement 
to  build  them. 

We  are  confronted  everywhere  with  the  uni- 
versal law  of  economics  above  referred  to — the 


212  INIJUS'IKIAL    I KII-DoM. 

cc|tiali7.ati<)ii  of  rales  of  profit.  In  most  cases,  if 
ail  expense  is  incurred  hy  those  ownin}^  a  |jar- 
licular  class  of  property  or  cnj^aj^cd  in  a  particu- 
lar kind  of  Inisiness,  they  arc  able  very  soon,  if 
not  at  once,  to  call  on  the  rest  of  the  world  to 
share  the  hiirden  with  them.  When  this  can  not 
be  done  immediately,  it  is  done  gradually 
throuj^^h  the  diminution  of  that  class  of  proj)- 
erty  or  that  business.  In  every  case,  therefore, 
we  may  say  that  the  attempt  to  diminish  particu- 
lar jM-ofits  by  taxini,^  them  leads  eventually  to 
the  diminution  of  profits  in  general.  The  effect 
of  such  a  diminution  we  have  already  referred 
to,  and  it  is  unnecessary  to  repeat  the  conclu- 
sions heretofore  suggested. 

The  demagogues  of  this  country  who  advo- 
cated the  tax  on  incomes,  therefore,  if  they  be- 
lieved that  labourers  would  pay  no  part  of  it, 
might  have  found  that  they  were  mistaken.  The 
measure  tliat  was  adopted  in  1894  provided  for 
a  tax  on  the  dividends  of  corporations  as  well 
as  on  the  interest  paid  on  their  debts.  This 
would  clearly  have  been  paid  in  the  first  place 
by  the  stockholders  in  these  corporations  and  by 
the  holders  of  their  bonds.  Such  securities  are 
very  largely  held  by  fiduciary  institutions,  and 
their  depositors  would  thus  have  contributed  to 
the  payment  of  this  tax.     In  many  cases,  how- 


MEASURES    FOR    REDUCING    PROFITS.  213 

ever,  the  corporations,  as  was  formerly  the  case 
with  the  street-car  companies,  would  have  been 
able  to  raise  the  rates  for  their  services,  and  the 
tax  would  thus  have  been  indefinitely  diffused. 
To  some  extent,  although  no  one  can  say  to  what 
extent,  the  same  would  have  been  true  of  the 
tax  on  the  income  of  individuals.  So  far  as  that 
income  was  derived  from  trade  or  professional 
services  it  would  in  some  cases  have  been  in- 
creased by  higher  charges  to  an  extent  greater 
than  the  tax,  in  some  cases  to  a  less  extent,  and 
in  many  probably  not  at  all.  It  is  altogether 
impossible  to  determine  whether,  on  the  whole, 
the  collection  of  this  tax  would  have  eventually 
Hghtened  the  burdens  of  labourers  or  not;  for 
the  expense  of  collection,  including  therein  the 
annoyance  and  waste  of  time  to  every  one  that 
had  to  make  a  return,  as  well  as  the  premium 
ofifered  to  those  who  evaded  the  tax,  would  have 
been  in  the  aggregate  enormous,  and  those  upon 
whom  this  expense  fell  would  apparently  have 
been  to  some  extent  less  able  to  pay  wages. 

It  is  thought  expedient  everywhere  in  this 
country  to  make  the  cost  of  schooling  for  the 
children  of  the  common  people  a  public  charge. 
In  some  cases  the  Government  furnishes  books 
and  transportation  for  the  pupils,  and  the  gratui- 
tous distribution  of  food  is  occasionally  demand- 


2\.\  INDUSTRIAL    IKIIKDOM, 

c»I.  This  policy  lias  been  adojjtcd  for  various 
reasons,  but  il  is  commonly  approved  on  the 
j^roiind  that  in  this  way  the  common  people  arc 
exempted  from  the  cost  of  cducatinj^  their  ofT- 
sprin^^  lUit  the  cost  must  fall  somewhere;  it 
must  be  paid  out  of  profits  or  wages.  We  do  not 
explain  it  by  sayinj^'  that  the  state,  or  the  public, 
or  the  (iovcrnmcnt.  bears  the  charfj^es.  Individ- 
ual men  bear  them,  in  the  shape  of  reductions 
of  their  income  or  of  their  wap:es. 

It  is  (|uile  conceivable  that  if  the  cost  of  the 
common  schools  were  directly  met  by  those  edu- 
cating their  children  at  them  their  income  might 
be  correspondingly  increased.  Such  a  statement 
is  altogether  paradoxical  to  Americans;  but  it 
would  be  equally  paradoxical  in  a  European 
country  to  suggest  that  the  Church  could  be 
sustained  without  the  support  of  the  Govern- 
ment. We  have  proved  that  it  can,  and  the  poor 
are  nowhere  better  supplied  with  efficient  re- 
ligious institutions.  In  fact,  the  interests  of  all 
sorts  and  conditions  of  men  are  so  thoroughly 
blended  and  intertwined  by  the  action  of  innu- 
merable social  forces  as  to  insure  the  failure  of 
almost  all  legislative  attempts  to  improve  the 
condition  of  one  class  by  imposing  burdens  on 
others.  Taxes  on  profits  may  tend  to  reduce 
wages;    taxes  on  wages  may  indirectly  reduce 


MEASURES    FOR    REDUCING    PROFITS.  21$ 

profits.  Certain  individuals  may  for  a  time  gain 
or  lose  because  of  such  attempts;  but  neither  any 
considerable  class  of  citizens  nor  the  community 
at  large  is  likely  in  the  long  run  to  receive  much 
but  injury  from  them. 

The  consequences  of  taxing  interest  and 
profits  in  general  with  a  view  to  increasing  wages 
are  of  such  dubious  and  uncertain  efficacy  as  usu- 
ally to  deter  legislators  from  the  attempt.  But 
since  the  income  of  the  possessors  of  capital  is 
to  a  considerable  extent  expended  for  luxuries, 
it  is  conceivable  that  this  portion  of  income  may 
be  taxed  without  at  all  diminishing  that  portion 
applied  to  the  payment  of  wages  in  productive 
employments.  Taxes  of  this  kind  were  in  favour 
during  the  middle  ages.  Those  desiring  to  con- 
sume certain  commodities  were  obliged  to  pay 
for  licenses  entitling  them  to  such  gratifications. 
Yet  it  would  be  hard  to  show  that  such  exactions 
have  ever  resulted  in  any  lightening  of  the  bur- 
dens of  the  poor.  The  difficulty  with  these  taxes 
is  that  no  principle  can  be  established  for  defin- 
ing luxuries.  The  nearest  approach  to  a  defini- 
tion is  to  call  a  luxury  whatever  certain  people 
indulge  themselves  in,  when  in  their  neighbours' 
opinion  they  could  just  as  w^ell  do  without  it. 
No  one  can  deny,  however,  that  the  opinion  of 
the  majority  would  pronounce  luxuries  a  number 
15 


2l6  INDUSTRIAL    FRKKDOM. 

(if  tliiii.i;s  that  many  poor  people,  as  well  as  rich, 
liiitl  necessary  for  their  comfort,  perhaps  even  for 
their  existence.  Old  and  fine  wines  are  called 
luxuries  because  they  are  drunk  l>y  rich  men  who 
are  in  ^ood  health,  liut  doctors  consider  them  a 
necessity  in  certain  cases,  and  if  the  life  of  a  poor 
man  can  he  saved,  or  the  strenj^th  of  a  poor 
woman  restored,  or  even  if  their  suffering  can 
be  alleviated  by  the  use  of  these  remedies,  it 
seems  deplorable  for  the  Government  to  put 
them  out  of  their  reach  by  taxing  them. 
The  law,  however,  can  not  inquire  into  the  cir- 
cumstances under  which  every  bottle  of  wine  is 
consumed,  and  if  it  hits  the  poor  while  aiming 
at  the  rich,  that  must  be  accepted  as  an  essential 
feature  of  sumptuary  legislation. 

It  would  be  easy  to  multiply  proofs  of  this. 
To  the  ordinary  Philistine  the  notion  that  works 
of  art,  or  beautiful  things  in  general,  are  not 
luxuries  is  paradoxical.  He  knows  that  if  it 
came  to  choosing  between  good  things  to  eat 
and  drink  and  wear,  on  one  side,  and  pictures  or 
music,  or  even  books  or  flowers,  on  the  other, 
he  would  choose  the  former,  calling  them  the 
necessaries  of  life  and  the  latter  the  luxuries. 
Nevertheless  there  are  many  poor  people  whose 
tastes  are  different,  and  who  content  themselves 
with  plain  living  in  order  that  they  may  procure 


MEASURES    FOR    REDUCING    PROFITS.  21/ 

what  are  necessities  for  their  natures.  Indeed, 
we  can  not  separate  the  necessary  from  the  kix- 
urious  unless  we  draw  the  Hne  at  the  very  bottom 
of  the  scale.  Just  so  much  food  of  the  cheapest 
kind  as  is  sufficient  to  maintain  health;  just  so 
much  clothing  and  shelter,  also  of  the  cheapest 
kind,  as  will  preserve  vitality — only  this  is  neces- 
sary to  man.  Whatsoever  is  more  than  this 
Cometh  of  luxury.  As  it  is  palpably  absurd  for 
the  Legislature  to  attempt  to  tax  everybody  on 
the  luxuries  he  consumes  with  the  expectation 
of  improving  his  condition,  so  it  is  equally  absurd 
for  it  to  imagine  that  it  can  discover  any  articles 
of  extensive  consumption  the  taxation  of  which 
would  not  fall  on  the  poor  as  well  as  the  rich. 
To  determine  the  degree  of  incidence  on  the  dif- 
ferent classes  would  be  an  extremely  difficult  un- 
dertaking, and  one  for  which  the  Legislature  is 
altogether  incompetent;  nor  can  any  one,  even 
if  he  entertain  the  highest  opinion  of  the  capaci- 
ty of  legislators  in  general,  seriously  contend 
that  those  whom  we  elect  are  qualified  to  formu- 
late lists  of  articles  to  be  banned  on  aesthetic 
grounds,  or  because  they  are  prejudicial  to  that 
form  of  social  development  which,  according  to 
the  doctrine  of  evolution,  may  hereafter  prevail. 
Still,  we  must  observe,  the  view  that  taxes 
can  be  drawn  from  that  part  of  the  income  of  the 


2l8  iNDirSTKiAL   iki:i:ot)M. 

cnniminiity  which  would  not  he  profhictivcly  cm- 
ploycil  contains  an  ini|)ortant  trnlh.  Taxes,  as 
vvc  liave  seen,  nuist  ht-  paid  out  of  income.  They 
may  often  for  a  time  and  in  particular  cases  come 
out  of  principal,  hut  measures  j)roducin^  this  re- 
suh  arc  of  the  nature  of  confiscation  rather  than 
taxation,  and  can  not  be  permanently  effective. 
Taxes,  then,  that  arc  paid  out  of  that  part  of 
income  which  would  he  employed  as  capital  are 
prejudicial.  In  any  sound  polity  they  must  be 
drawn  out  of  that  other  part  of  income  which  is 
unproductivcly  consumed.  In  other  words,  taxa- 
tion is  injurious  and  excessive  when  the  citizens 
diminish  their  savings  rather  than  their  spendings. 
Bearing  this  in  mind,  we  can  understand  why 
that  most  benevolent  of  men,  Adam  Smith, 
should  have  declared  himself  in  favour  of  taxing 
the  luxuries  of  the  poor.  So  little  revenue  has 
been  derived  from  attempting  to  tax  the  luxuries 
of  the  rich,  that  governments  have  been  impelled 
to  levy  their  exactions  on  the  expenditures  of 
the  poor,  and  it  has  seemed  better  to  tax  those 
expenditures  that  can  be  reduced  with  the  least 
suffering.  It  seems  to  be  commonly  assumed, 
therefore,  tliat  as  the  poor  are  able  to  obtain  the 
ordinary  necessities  of  life,  and  at  the  same  time 
to  consume  tobacco  and  alcoholic  drinks,  these 
articles  should  be  subjected  to  taxation. 


MEASURES    FOR    REDUCING    PROFITS.  219 

We  are  concerned  with  this  theory  only  in 
so  far  as  it  illustrates  our  proposition  that  taxes 
ought  to  reduce  as  Httle  as  possible  that  part  of 
the  income  of  a  people  which  is  saved.  It  is  that 
part  which  insures  future  progress,  the  decrease 
of  which  insures  lower  wages.  Taxes  on  so-called 
luxuries  may  induce  some  men  to  give  them  up, 
and  thus  increase  their  savings.  They  may  cause 
other  men  to  devote  what  they  would  have  saved 
to  meeting  the  increased  cost  of  their  luxuries. 
So  far  as  these  taxes  are  productive  of  revenue 
they  perhaps  indicate  that  most  men  prefer  to 
continue  their  luxurious  consumption  and  econ- 
omize elsewhere.  In  a  broad  view  of  the  sub- 
ject it  seems  that  the  amount  of  taxation  is  of 
more  consequence  than  its  subjects.  No  writer 
has  demonstrated  that  a  tax  on  articles  consumed 
by  the  poor  is  permanently  paid  by  them  alone, 
nor  that  a  tax  on  bread  or  clothes  would  burden 
them  collectively  more  than  one  on  beer  or  to- 
bacco. Nor  has  it  been  demonstrated  that  taxes 
on  profits  are  never  paid  out  of  wages.  But  it 
requires  no  demonstration  to  convince  an  impar- 
tial inquirer,  that  as  taxes  are  certainly  taken  out 
of  the  gross  product  of  the  whole  community, 
so  they  tend  eventually  to  be  assessed  upon  the 
different  shares  of  that  product  in  much  the  same 
proportion  as  the  other  expenses  of  production. 


220  INDUSTRIAL    rKKKDOM. 

\Vc  must  now  consider  how  far  the  con(htion 
of  tlie  poor  can  he  imi)rovefl  by  some  measures 
of  confiscation  that  ha\e  recently  come  into  fa- 
vour with  oiu"  legislators.  The  colossal  fortunes 
ac(iuired  in  modern  times  by  single  individuals 
are  not  easily  reconciled  with  the  theories  of 
democracy,  and  it  is  not  surprising  that  so  com- 
mon and  violent  a  passion  as  envy  should  aflect 
the  policy  of  our  governments.  Rut  we  must 
not  forget  that  various  attempts  have  been  made 
by  rulers  in  all  parts  of  the  world  and  at  all  times 
to  compel  the  possessors  of  great  wealth  to  give 
up  a  part  of  it.  In  many  Asiatic  kingdoms  the 
most  drastic  methods  have  been  employed  in 
dealing  with  the  rich,  and  they  have  been  imi- 
tated to  some  extent  by  European  despots.  But 
wiierc  these  methods  iiave  prevailed  the  condi- 
tion of  labourers  has  been  invariably  wretched, 
and  it  has  been  wretched  precisely  because  of  the 
general  insecurity  that  must  accompany  confisca- 
tion. If  we  merely  aim  to  decrease  the  property 
of  the  very  rich,  the  problem  is  comparatively 
simple;  but  if  we  aim  to  increase  that  of  the 
poor  by  confiscating  that  of  the  rich,  we  may 
create  economic  conditions  that  will  defeat  our 
purpose. 

Some  persons  apparently  suppose  that  a  law 
might  be  passed  forbidding  any  one  to  possess 


MEASURES    FOR    REDUCING    PROFITS.  221 

more  than  a  certain  amount  of  property,  and 
ordaining  that  any  excess  should  be  devoted  to 
public  uses,  thereby  exempting  the  great  mass 
of  citizens  from  taxation.  The  difficulties  in  the 
way  of  such  legislation  are  numberless.  It  is 
hard  to  fix  the  maximum  amount  of  property 
that  any  one  should  be  permitted  to  enjoy.  The 
millionaires  would  set  the  limit  high;  the  popu- 
lace would  set  it  low.  The  great  majority  regard 
a  hundred  thousand  dollars,  or  even  fifty  thou- 
sand dollars,  as  a  great  fortune,  and  the  majority 
would  determine  what  the  limit  should  be. 
Even  ten  thousand  dollars  is  far  beyond  the  as- 
pirations of  most  people,  and  if  the  matter  were 
submitted  to  popular  vote,  it  would  seem  rea- 
sonable to  expect  that  the  possession  of  any  for- 
tune greater  than  what  the  ordinary  man  can 
hope  to  acquire  would  be  pronounced  unjust. 
But  any  exceptional  burden  laid  on  such  fortunes 
would  affect  the  employment  of  labourers  very 
directly. 

Even  if  the  attempt  at  confiscation  were  con- 
fined to  very  great  fortunes  it  might  be  de- 
feated.*     We  can  not  expect  the  co-operation 

*  We  are  told  by  M.  des  Essars,  of  the  Bank  of  France,  in  his 
History  of  French  Banking,  that  about  1715,  financiers,  and  espe- 
cially revenue  farmers,  having  become  extremely  obnoxious  to  the 
people,  who  imputed  to  them  misfortunes  for  which  the  rapacity  of 


222  INDUSTKIAI.    I  KKI.DoM, 

of  wcaltliy  iiKMi  ill  .schemes  intended  to  deprive 
tlicin  of  their  property,  and  we  can  not  nowadays 
conipti  ihciii  to  (H.sclose  what  they  own  by  apply- 
ing the  bastinado,  or  jjulhng  out  their  teeth,  as 
was  done  to  the  Jews  l>y  sonic  of  the  Knj^dish 
kinj;s.  The  possession  of  wealth  would  be  con- 
cealed, and  such  concealment  is  known  to  be 
practicable.  Under  our  law  all  tanj^iblc  property 
is  taxable,  and  all  rij^hts  in  that  property,  or 
choses  in  action,  are  also  taxable.  But  as  it  is 
the  tangible  property  that  produces  revenue,  the 
common  sense  of  mankind  revolts  against  the  as- 
sessment of  mere  evidences  of  debt;  and  al- 
though such  personal  property  is  nearly  ever>'- 

the  Trcxsury  should  have  been  held  .iccount.-ible,  the  regency  de- 
termined on  making  an  indiscriminate  spoliation  of  this  class,  or, 
as  the  saying  was,  upon  making  them  "disgorge,"  To  this  end 
they  were  forbidden  to  quit  the  countr)'  under  pain  of  death,  and  a 
Chamber  of  Justice  was  erected  to  take  cognizance  of  their  official 
extortions.  They  were  ordered  to  produce  all  their  accounts  for 
twenty-seven  years,  to  prove  what  they  were  worth  at  the  beginning 
of  this  period,  and  to  furnish  a  minute  account  of  their  possessions 
at  its  end.  False  testimony  was  punishable  by  sentence  to  the  gal- 
leys for  life,  and  rewards  were  offered  to  informers.  If  no  offense 
could  be  proved  .against  the  accused,  the  Chamber  of  Justice  let  him 
off  with  the  confiscation  of  four  fifth.s  of  his  earnings  during  twenty- 
seven  years  and  the  admonition  that  he  retained  the  remaining 
fifth  by  the  grace  of  the  king.  About  six  thousand  persons  were 
prosecuted,  whose  possessions  amounted  by  their  own  showing  to 
1,200,000,000  livres  ;  4,410  of  these  were  condemned  to  pay  a  total 
of  2ig,ooo,ooo  livres  ;  but  many  of  them  were  able  to  find  powerful 
protectors,  and  by  1 71 7  the  Treasury  had  recovered  only  70,000,000 
livres,  and  barely  half  the  fines  imposed  were  ever  collected  at  all. 


MEASURES    FOR    REDUCING    PROFITS.  223 

where  taxable  by  law,  the  amount  actually  taxed 
is  comparatively  insignificant. 

In  some  communities  very  earnest  attempts 
are  made  to  collect  such  taxes,  and  capital  ac- 
cordingly flies  h"om  such  communities  to  those 
where  assessors  are  more  lenient.  We  can  not 
forbid  men  to  travel;  no  practical  plan  has  ever 
been  suggested  to  prevent  rich  people  from  tak- 
ing their  money  to  Europe  and  spending  it  there, 
although  the  practice  has  encountered  the  stern- 
est reprobation  from  some  moralists.  So  far  as 
personal  property  is  concerned,  to  prohibit  the 
possession  of  more  than  a  certain  quantity  of  it 
would  be  a  mere  brutum  fiilmen.  Unless  the  whole 
fabric  of  our  law  were  torn  to  pieces,  and  the 
transfer  of  personal  property  surrounded  with  the 
same  formalities  as  that  of  real  estate,  no  limita- 
tion of  ownership  would  be  practicable.  But  to 
require  such  formalities  would  destroy  civiliza- 
tion. If  no  purchase  of  goods  could  be  made 
except  by  deed,  executed,  acknowledged,  and  re- 
corded, the  entire  traffic  of  mankind  would  be 
arrested.  The  baker  could  not  give  title  to 
his  rolls,  the  dairyman  to  his  milk,  or  the 
butcher  to  his  meat.  But  unless  this  formality 
were  enforced,  no  one  could  be  hindered  from 
paying  money;  and  unless  we  could  make  it  im- 
practicable for  rich  men  to  receive  money,  we 


224  INDUSTRIAI.    TUKKDOM. 

could  not  keep  them  from  iK^anlin;^  it,  and  liid- 
in^  it,  and  carrying  it  where  they  thought  it 
would  l)C  safest. 

As  to  real  estate,  it  is  conceivable  that  limita- 
tions of  the  amount  owned  might  be  to  some 
extent  enforced,  although  obviously  at  great  ex- 
pense. A  man  may  own  land  in  every  State,  and 
}c't  the  fact  be  known  only  to  himself.  The  only 
way  in  which  large  ownership  could  be  prevented 
would  be  by  disqualifying  large  owners  from  giv- 
ing title.  P)Ut  this  would  impose  an  intolerable 
burden  u])nii  the  purchasers  of  land.  To  be 
sure  of  their  property  they  would  have  to  search 
in  all  the  counties  of  all  the  States,  and  they 
could  never  make  these  searches  terminate  to- 
gether. No  people  accustomed  to  our  present 
methods  could  be  brought  to  submit  to  such  a 
system.  But  if  large  owners  of  land  were  able 
to  give  good  title,  it  is  safe  to  say  that  they  would 
never  be  found  in  possession  of  more  than  the 
permitted  quantity  of  land.  They  would  find 
trustworthy  agents  to  hold  land  for  them;  and 
if  the  difficulties  proved  serious,  they  would  grad- 
ually transmute  their  holdings  of  real  estate  into 
personal  property. 

The  existence  of  these  obstacles  has  caused 
legislators  to  turn  their  attention,  of  recent  years, 
to  the  development  of  a  system  of  taxes  known 


MEASURES    FOR    REDUCING    PROFITS.  22 5 

variously  as  inheritance,  or  succession  taxes,  or 
as  legacy,  or  transfer,  or  death  duties.  Since 
it  has  proved  impracticable  to  collect  exceptional 
taxes  from  those  in  possession  of  great  fortunes 
while  they  were  aUve,  it  has  been  thought  that 
better  success  might  be  had  with  those  who  suc- 
ceed to  these  fortunes  upon  the  death  of  the 
original  proprietors.  The  opportunity  is  given 
by  the  necessary  publicity  of  the  proceedings  of 
probate  courts.  No  legislation  can  be  devised 
to  prevent  a  man  from  parting  with  his  wealth 
while  he  is  living;  but  when  he  dies  no  title  can 
be  made  to  what  he  owned  without  the  aid  of 
the  law.  Many  ingenious  and  refined  reasons 
have  been  suggested  why  this  aid  should  be 
granted  only  on  the  payment  of  a  fine  or 
tax;  but  we  are  not  concerned  with  the  vaHdity 
of  these  reasons.  Our  inquiry  is  limited  to  the 
consideration  of  the  economic  effect  of  such 
taxes.  Can  the  Government  derive  sufficient 
revenue  in  this  way  to  lighten  the  burden  of  tax- 
ation for  the  poor?  If  not,  the  death  duties, 
whatever  theoretical  merits  they  may  possess,  do 
not  contribute  to  the  attainment  of  our  ideal  of 
justice. 

It  may  be  conceded,  for  the  purposes  of  argu- 
ment, that  the  constitutional  difficulties  in  the 
way  of  imposing  exceptionally  high  death  duties 


22C}  INDUSTKIAI.    I  KKKDOM. 

ill  the  case  (jf  j^reat  estates  can  he  overcome. 
1 1  may  I'C  conceded  further  that,  if  these  duties 
arc  iiKMk-ialc  in  amount,  the  j)osscssors  of  great 
estates  will  not  take  the  trouble  to  evade  them. 
r.ut  if  they  arc  moderate  in  amf)unt  they  will 
not  he  sulliciently  j)r(jductive  to  reduce  appre- 
ciably the  rate  of  other  taxation.  The  amount 
now  dcniandrd  for  public  purposes  is  so  great 
that  a  small  percentage  of  the  value  of  the  large 
fortunes  that  are  administered  through  the  pro- 
bate courts  would  not  furnish  any  sensible  relief 
to  the  poor.  It  would  therefore  be  thought  ne- 
cessary, and  it  would  doubtless  be  popular,  to 
make  the  tax  very  high,  and  it  has  lately  been 
proposed  in  the  State  of  New  York  to  confiscate 
as  much  as  fifteen  per  cent  in  some  cases  of 
decedents'  estates. 

It  can  hardly  be  contended  that  the  prospect 
of  such  exactions  will  be  contemplated  with  in- 
ditTerence  by  the  wealthy.  If  they  can  so  ar- 
range their  afTairs  that  their  property  will  not 
be  subjected  to  this  amercement,  they  will  cer- 
tainly, as  a  rule,  be  tempted  to  do  so.  And  they 
unquestionably  can  so  arrange  their  affairs.  Xo 
statute  of  this  kind  has  yet  been  devised  which 
will  defy  the  ingenuit)-  of  astute  lawyers  to  cir- 
cumvent it.  Their  schemes  may  be  thwarted  by 
accident,   and  mav  invoKe   nuich  inconvenience 


MEASURES    FOR    REDUCING    PROFITS.  22/ 

and  expense;  but  they  can  be  made  on  the  whole 
effective.  Much  confidence  would  have  to  be 
reposed  in  expected  survivors;  but  no  more  than 
men  now  often  repose  in  their  executors.  Doubt- 
less many  rich  men  are  comparatively  indifferent 
as  to  what  becomes  of  their  property  after  their 
death.  Provided  they  can  enjoy  it  and  control 
it  while  they  live,  they  care  little  for  those  who 
come  after  them.  But  such  is  not  the  rule. 
Those  who  have  children  desire  to  assure  them 
comfort  and  social  position;  those  without  rela- 
tives wish  to  endow  institutions;  and  they  would 
generally  prefer  that  their  accumulations  should 
be  expended  under  their  own  direction,  and  not 
by  our  legislators. 

Since  the  tax  is  imposed  as  a  charge  for  the 
assistance  rendered  by  the  law  in  confirming  the 
title  to  property,  that  assistance  will  be  to  a  great 
extent  declined.  Other  and  cheaper  methods  of 
making  title  will  be  resorted  to,  and  the  revenue 
from  this  tax  will  eventually  prove  to  be  much 
less  than  is  anticipated  by  its  advocates.  Nor 
should  we  forget  to  reckon  the  expense  of  col- 
lection in  estimating  the  net  return  to  the  pub- 
lic. The  statutes  imposing  the  tax  are  neces- 
sarily so  complicated  as  to  make  it  unsafe  for  the 
representatives  of  decedents  to  proceed  without 
legal  advice,   and   the  fees  of  lawyers,   whether 


228  INDUSTRIAL    1  KKEDOM. 

paid  by  the  (if)vcrnnicnt  or  by  these  repre- 
sentatives, contribute  a  deduction  from  the 
^^•lin  to  be  dcrivfd  from  this  source  by  the  com- 
munity. 

In  the  city  of  Xew  York  no  lawyer  of  stand- 
iii}^  would  care  to  go  through  all  the  formalities 
required  for  the  settlement  of  this  tax  for  less 
than  twenty-five  or  fifty  dollars,  even  in  the  case 
of  a  small  and  simple  estate.  If  the  estate  is  large, 
and  if  questions  arise  that  have  to  be  litigated, 
the  fee  may  be  augmented  ten,  or  fifty,  or  a  hun- 
dred fold.  To  this  must  be  added  the  salaries 
and  fees  of  the  taxgatherers.  The  law  had  al- 
ready provided  for  the  appraisement  of  decedents' 
estates;  but  this  statute  creates  a  dujilicate  set  of 
appraisers  to  repeat  the  process  and  double  the 
charges.  It  adds  a  list  of  salaried  officers  in  the 
surrogates'  courts,  and  a  further  set  in  the  dis- 
trict attorneys'  offices,  and  it  authorizes  these 
attorneys  to  receive  for  their  own  use  very  sub- 
stantial costs  in  proceedings  instituted  by  them, 
whether  successful  or  unsuccessful;  while  the 
custodians  of  the  money  collected  are  paid  a  per- 
centage on  its  amount.  One  of  these  custodians, 
it  is  estimated,  was  presented  with  about  sixty 
thousand  dollars  for  his  services  in  receiving  the 
tax  levied  on  one  estate,  although  his  functions 
consist    principally    in    depositing    checks.      To 


MEASURES    FOR    REDUCING    PROFITS.  229 

many  minds  this  suggests  robbery  rather  than 
justice. 

The  tax  is  defended  by  many  enthusiastic 
theorists,  but  it  is  probable  that  no  other  tax 
imposed  by  the  State  of  New  York  inflicts  so 
great  a  burden  on  the  community  in  proportion 
to  the  revenue  it  produces.  However  levied,  it 
is  frequently  paid  by  those  ill  prepared  to  pay 
it.  If  levied  on  small  estates,  it  is  oppressive 
to  widows  and  orphans.  When  a  man  engaged 
in  active  business  dies,  his  family  is  deprived  of 
his  earnings,  and  the  Government  seizes  on  a 
part  of  the  savings  on  which  his  family  must  now 
depend  for  support.  Even  when  the  decedent 
was  out  of  business,  his  death  frequently  reduces 
the  income  of  his  family.  And  in  the  case  of 
great  estates,  the  payment  of  the  tax  must,  as 
a  rule,  come  directly  out  of  the  fund  of  loanable 
capital,  and  thus  tend  to  reduce  the  part  avail- 
able for  the  employment  of  labour.  Whether  this 
tendency  will  result  in  a  serious  loss  we  can  not 
yet  tell.  We  know  that,  in  the  past,  dread  of 
confiscation  has  made  some  men  live  meanly  and 
hoard  their  money,  while  others  have  preferred 
to  spend  it  before  the  Government  could  seize 
it.  We  may  find  that  the  new  taxes  do  not  ma- 
terially discourage  the  accumulation  of  wealth; 
but  as  the  tendency  of  reform  has  been  to  re- 


230  INDUSTRIAL    FRKEDOM. 

move  ohstailcs  to  accuinulatioii,  llic  imposition 
of  penalties  on  this  process  is  likely  to  check  it 
to  some  extent. 

We  may,  however,  be  quite  sure  of  one  re- 
sult: that  the  abilities  which  have  enablerl  some 
men  to  actjuire  great  fortunes  by  objectionable 
and  even  illegal  i)raclices  will  enable  them  in 
some  measure  to  protect  their  wealth  against 
confiscation.  It  will  be  the  wealth  of  the  de- 
fenceless that  will  suffer — the  wealth  of  those  who 
are  unable  to  circumvent  the  law,  or  who  con- 
sider it  wrong  to  evade  any  burden  laid  f»n  them 
by  legislators.  Persons  of  this  description  gen- 
erally use  their  wealth  beneficently  while  they 
hve.  They  support  many  charities;  they  gener- 
ally have  long  lists  of  impoverished  and  helpless 
friends  and  relatives  who  call  on  them  for  as- 
sistance. These  pensions  they  do  not  wish  inter- 
rupted by  their  death;  but  the  taxes  on  legacies 
and  bequests  are  a  distinct  discouragement  to 
such  ciiaritable  purposes.  The  death  of  such 
citizens  can  seldom  be  a  gain  to  the  community. 
They  generally  add  to  its  wealth  by  hving.  and 
the  confiscation  of  their  property  at  death  by 
the  community  may  be  but  adding  one  loss  to 
another. 

To  this  whole  line  of  argument  there  is  one 
comprehensive  reply.     Granted,  the  objector  will 


MEASURES    FOR    REDUCING    PROFITS.  23 1 

say,  that  if  the  income  of  the  wealthy  is  dimin- 
ished they  can  not  pay  so  much  in  wages  as  be- 
fore, what  does  that  prove?  The  proposition  is 
self-evident;  and  it  was  quite  unnecessary  to  es- 
tablish it  by  many  pages  of  elaborate  demonstra- 
tion. The  diminution  of  the  income  of  the 
wealthy  and  the  decrease  of  wages  are  but  half 
the  phenomenon,  but  one  side  of  the  case.  What 
is  taken  from  the  rich  is  taken  by  the  Govern- 
ment and  applied  to  the  promotion  of  the  gen- 
eral welfare.  It  may  be  directly  employed  in  the 
payment  of  wages;  part  of  it  is  necessarily  so  em- 
ployed. It  is,  at  all  events,  expended  for  public 
purposes,  and  while  the  action  of  the  Govern- 
ment apparently  reduces  wages,  it  really  benefits 
the  poor  by  furnishing  them  what  wages  buy, 
and  what  they  would  have  to  purchase  with 
wages  did  not  the  Government  purchase  it  for 
them.  How  else  than  through  the  Government 
can  roads  be  provided?  Can  labourers  establish 
parks  with  their  wages,  or  lay  out  streets,  or 
maintain  the  courts  and  the  post?  The  possi- 
bilities of  beneficent  public  expenditure  are  in- 
finite, and  while  such  measures  involve  the  tem- 
porary reduction  of  the  income  of  the  community 
by  taxation,  they  restore  in  the  end  more  than 
they  take  away. 

The  answer  to  this  objection  I  shall  not  here 
16 


232  INDUSTKIAL    !■  RMKDOM. 

attempt  to  State,  for  the  simple  reason  that  I 
am  afraid  to  tax  further  the  |)atience  of  those 
readers  who  have  followed  my  argument  to  this 
point,  r.ut.  although  a  conclusive  answer  would 
lill  a  volume  by  itself,  it  is  possible  to  give  its 
outlines  within  a  narrow  compass.  To  the  asser- 
tion that  public  expenditure  restores  more  to  the 
community  than  it  takes  away,  except  within 
certain  well-defined  limits,  the  proper  reply  is  a 
flat  contradiction.  The  evidence  of  the  wasteful- 
ness of  governmental  administration  is  perfectly 
overwhelming.  Si  monumcnliim  qnccris  circttm- 
spicc.  What  rational  man  will  maintain  that  the 
one  hundred  and  forty  million  dollars  taken  an- 
nually by  taxation  from  the  earnings  of  the  peo- 
ple and  distributed  to  pensioners  is  not  an  op- 
pressive burden  upon  industry?  That  sum  is 
more  than  can  be  saved  in  a  year  by  a  million 
families  of  farmers.  It  would  be  easy  to  select 
a  million  whose  total  yearly  income  in  money 
does  not  amount  to  that  sum.  It  is  a  half  year's 
wages  for  a  million  common  labourers;  and  al- 
though it  is  more  than  thirty  years  since  the  close 
of  the  civil  war,  and  although  no  pensions  are 
paid  to  those  who  fought  on  the  side  of  the  South 
or  their  dependents,  it  would  be  rash  to  predict 
that  new  pension  acts  will  not  hereafter  increase 
the  burden  even  beyond  its  present  size. 


MEASURES    FOR    REDUCING    PROFITS.  233 

Much  of  the  money  paid  in  pensions  is  well 
expended;  but  no  one  who  has  acquaintance  with 
pensioners  can  deny  that  a  very  large  part  of  it 
merely  promotes  idleness  and  encourages  dissi- 
pation. It  certainly  requires  great  hardihood  to 
maintain  that  if  the  Government  were  to  leave 
one  hundred  millions  of  this  sum  in  the  posses- 
sion of  those  who  earn  it,  it  would  not  be  ex- 
pended so  as  to  promote  the  general  welfare 
more  than  at  present.  Had  the  Government 
been  relieved  from  this  expenditure,  the  pro- 
digious losses  to  the  country  caused  by  the  im- 
minent bankruptcy  of  the  Treasury  during  the 
last  few  years  might  have  been  altogether 
averted. 

In  .what  department  does  the  expenditure  of 
money  by  Government  produce  results  commen- 
surate with  those  obtained  by  the  private  invest- 
ment of  capital?  Have  the  extensive  purchases 
of  silver  bulHon  by  the  Treasury  resulted,  on  the 
whole,  in  a  satisfactory  profit?  Shall  we  instance 
the  governmental  expenditure  for  printing,  or 
for  the  distribution  of  seeds,  or  for  the  produc- 
tion of  rain  by  exploding  dynamite?  Will  the 
vouchers  for  supplying  the  manifold  luxurious 
requirements  of  our  legislators  bear  publication? 
What  shall  we  say  of  the  policy  adopted  in  the 
State  of  New  York  whereby  the  employment  of 


234  INDUSTKIAI.    FKKKDfJM. 

convicts  at  remunerative  lalxnir  is  prohibited, 
and  free  labourers  are  taxed  tliat  criminals  may 
he  supported  in  idleness?  Is  the  Public  IJuild- 
inp^  at  riiiladelphia,  or  the  Courthouse  at 
New  York  city,  or  the  Capitol  at  Albany, 
an  illustration  of  the  economical  and  benefi- 
cent application  to  public  uses  of  the  pro- 
ceeds of  taxation,  the  restoration  to  the  people 
of  more  than  is  taken  from  them?  And  is  there 
any  evidence  that  waste  and  corruption  will  tend 
to  decline  as  the  funds  at  the  disposal  of  legis- 
lators increase? 

It  is  often  said  that  the  Government  at  least 
succeeds  well  in  the  management  of  the  post  of- 
fice, but  the  claim  will  not  bear  the  slightest  ex- 
amination. Its  management  shows  every  year 
a  large  deficit,  which  would  be  doubled  with  cor- 
rect bookkeeping.  Were  it  not  for  its  monopoly, 
the  Government  would  be  driven  out  of  business 
altogether  if  it  made  the  slightest  attempt  to 
do  business  on  business  principles.  The  express 
companies  would  take  the  whole  enterprise  off 
the  Government's  hands,  render  equally  good 
service  to  the  community  for  two  thirds  what  it 
now  pays,  and  make  a  good  profit  for  their  own 
stockholders.  They  would,  of  course,  have  to 
cut  off  the  $20,000,000  or  more  now  received  by 
a  subsidized  press  from  the  Government:  but  no 


MEASURES    FOR    REDUCING    PROFITS.  235 

one  not  pecuniarily  interested  will  contend  that 
the  productions  of  our  press  are,  on  the  whole, 
of  such  a  character  that  the  public  welfare  is  pro- 
moted by  taxing  the  people  for  their  gratuitous 
transportation.  Many  of  these  publications  are 
notoriously  scandalous  and  immoral.  Let  those 
who  want  them  pay  for  them;  let  those  who  hold 
them  pernicious  be  not  compelled  to  contribute 
to  their  promiscuous  dissemination.  Some  of  the 
"  Star  Routes," too, might  have  to  be  abandoned; 
but  let  those  who  would  maintain  them  read 
the  testimony  taken  a  few  years  ago  in  the  mal- 
odorous "  Star  Route  trials,"  the  conduct  of 
which,  it  may  be  remarked  by  the  way,  although 
the  Government  was  completely  defeated,  was  so 
expensive  and  scandalous  as  itself  to  require  in- 
vestigation. 

Government  at  any  cost  is  preferable  to  an- 
archy. Violence  can  be  systematically  repressed 
only  by  the  sovereign  power,  and  public  order 
is  essential  to  the  protection  of  private  rights. 
The  property  of  the  subject  is  therefore  prop- 
erly taxable  by  the  Government;  some  of  the 
income  of  the  individual  is  taken  from  him  in 
order  that  he  may  be  secured  in  "  life,  Hberty, 
and  the  pursuit  of  happiness."  To  a  certain  ex- 
tent, and  within  bounds  well  settled  by  experi- 
ence, there  is  general  agreement  that  taxation  is 


2j6  INDUSTKIAI.    IKI  I.Do.M. 

necessary  and  just,  in  spite  ol  the  almost  invari- 
able wastefulness  of  ^governmental  expenditure. 
W  lini  ranicil  hrynml  those  limits,  it  is  e(jually 
well  scttkd,  taxation  has  ruined  communities  and 
even  nations;  nor  is  there  anythinj^  in  the  form 
of  our  Government  or  the  character  of  our  legis- 
lators to  make  it  probable  that  we  shall  be  cx- 
(.11)] »t  from  the  usual  consequences  of  extrava- 
gance. 


CHAPTER  XIV. 

CONCLUSION. 

In  one  of  those  fine  digressions  by  which 
Hawthorne  often  incidentally  reveals  the  great- 
ness of  his  genius,  he  describes  his  hero  as  hav- 
ing "  that  sense,  or  inward  prophecy — which  a 
young  man  had  better  never  have  been  born  than 
not  to  have,  and  a  mature  man  had  better  die  at 
once  than  utterly  to  rehnquish — that  we  are  not 
doomed  to  creep  on  forever  in  the  old  bad  way, 
but  that,  this  very  now,  there  are  the  harbingers 
abroad  of  a  golden  era,  to  be  accomplished  in 
his  own  lifetime."  As  to  the  main  point,  Haw- 
thorne continues:  "  May  we  never  live  to  doubt 
it!  As  to  the  better  centuries  that  are  coming, 
the  artist  was  surely  right.  His  error  lay  in 
supposing  that  this  age,  more  than  any  past 
or  future  one,  is  destined  to  see  the  tattered  gar- 
ments of  antiquity  exchanged  for  a  new  suit,  in- 
stead of  gradually  renewing  themselves  by  patch- 
work; in  applying  his  own  little  life  span  as  the 

measure   of   an   interminable   achievement;    and 

237 


238  INDUSTHIAI.    IKKI  I)(»M. 

more  llian  all  in  faiKsin^  ili.ti  ii  mattered  any- 
lliiiij^  to  tlie  great  end  in  view  whetlicr  he  him- 
self should  contend  for  it  or  against  it." 

TIk'  truth  contained  in  this  passage  must  ever 
he  kept  in  mind  by  all  who  arc  interested  in  social 
reform.  It  may  seem  to  those  who  have  read  the 
foregoing  jiages  that  their  result  is  purely  nega- 
tive. The  great  prohlem  is,  to  reduce  the  ine- 
qualities of  wealth,  to  bring  about  such  a  distri- 
bution of  the  product  of  the  community  that 
those  who  now  receive  the  smallest  shares  shall 
receive  larger  ones;  and  this  book  is  made  up 
of  specious  arguments  intended  to  prove  that 
every  statute  intended  to  transfer  some  of  the 
wealth  of  those  who  have  more  than  enough  to 
those  who  have  less  must  fail.  The  author  con- 
tends that  all  attempts  to  compel  either  rich  cor- 
porations or  rich  individuals  to  bear  an  increased 
part  of  the  common  burdens  only  aggravate  the 
condition  of  the  poor,  and  thus  condemns  the 
world  to  remain  indefinitely  in  its  present  evil 
state — "  to  creep  on  forever  in  the  old  bad  way." 
What  is  this  but  to  shut  the  gates  of  hope  upon 
mankind? 

To  the  charge  of  disbelief  in  the  success  of 
the  schemes  for  social  reform  now  most  in  favour 
I  plead  guilty;  but  the  assumption  that  progress 
is  only  possible  through  these  schemes  is  prop- 


CONCLUSION.  239 

erly  met  with  an  unqualified  denial.  It  is  not 
those  who  insist  on  resorting  to  measures  proved 
disastrous  by  experience,  but  those  who  oppose 
the  repetition  of  such  blunders,  that  have  the 
more  rational  hope  for  the  future.  England,  that 
minute  speck  upon  the  globe,  has  during  the  last 
two  generations  made  prodigious  advances  in 
wealth,  advances  in  which  the  working  people 
have  participated.  Their  numbers  have  relatively 
diminished  because  many  of  them  have  risen  into 
the  middle  class;  but,  according  to  Mr.  Mallock's 
calculations,  their  average  wages  have  during  the 
century  considerably  more  than  doubled.  Their 
income  amounted  in  i860  to  as  much  as  the  in- 
come of  all  classes  in  1800;  it  amounted  in  1880 
to  as  much  as  the  income  of  all  classes  in  1850. 
The  great  factors  in  this  advance  have  been  two: 
the  substitution  of  the  forces  of  Nature  for  hu- 
man muscle,  and  the  abolition  of  innumerable 
taxes  and  restrictions  on  industrial  freedom 
which  had  been  established  by  Government  on 
the  pretense  of  promoting  the  public  good.  It 
may  not  be  reasonable  to  anticipate  any  discov- 
ery comparable  with  that  of  the  motive  power 
of  steam;  but  the  progress  of  invention  contin- 
ues. That  it  would  continue  under  a  regime  of 
socialism  is  doubtful.  Government  officers  have 
little  inducement   to  devote   their  time   to   the 


240  INDISTRIAL    FREEDOM. 

necessary  studios,  and  private  inventors  could  not 
alTord  it,  if  the  j)ossibility  of  preat  gains  were 
l)rccluded.  On  the  other  hand,  were  the  incu- 
bus of  govennnental  waste  and  dishonesty,  of 
legislative  blackmail,  of  vexatious  taxes,  of  per- 
l)lexing  restrictions,  of  official  commissions,  once 
removed,  industry  and  inventions  would  respond 
with  a  bound,  as  they  did  in  England  fifty  years 
ago. 

No  calm  and  rational  man  can  doubt  that  if 
our  Government  would  al)stain  from  compelling 
its  subjects  to  accept  promises  to  pay  as  pay- 
ment, and  would  cease  to  meddle  with  the  es- 
tablished standard  of  value,  the  employment  of 
capital  would  be  extended  and  the  compensation 
of  labourers  increased.  The  "  currency  prob- 
lem "  would  be  very  soon  settled  by  the  bankers 
of  the  country.  The  enlightened,  skilful,  and 
patriotic  action  of  these  able  men  during  the 
recent  years  of  panic  has  saved  the  nation  from 
bankruptcy;  saved  it  not  with  the  co-operation 
of  the  national  Legislature,  but  in  spite  of  its 
stupid  and  malignant  opposition.  If  any  one  be- 
lieves that  the  condition  of  the  common  people 
is  improved  by  having  Congress,  rather  than  pri- 
vate enterprise,  create  and  control  the  currency 
of  the  country,  he  must  hold  the  belief  in  the  face 
of  a  perfectly  overwhelming  mass  of  evidence. 


CONCLUSION.  241 

The  losses  suffered  by  workingmen  from  reduced 
wages  and  lack  of  employment  since  1892  are  far 
greater  than  can  be  made  up  to  them  by  all  the 
plans  for  improving  their  condition  by  diminish- 
ing the  wealth  of  their  employers.  It  is  of  the 
essence  of  these  plans  that  they  be  carried  out 
by  Government;  to  a  great  extent  by  the  very 
body  that  by  its  ignorant  perversity,  its  con- 
temptible spite,  and  its  narrow  partisanship  has 
spread  disaster  and  misery  throughout  the  land; 
the  body  whose  action  is  watched  with  anxiety 
rising  to  terror  by  cautious  capitalists  and  pru- 
dent men  of  business,  while  it  constitutes  the 
opportunity  of  reckless  speculators,  and  which  is 
seldom  so  well  employed  as  in  repealing  its  own 
mischievous  statutes. 

The  face  value  of  the  stocks  of  the  railways 
of  the  country  is  about  five  thousand  million  dol- 
lars, and  that  of  the  bonds  some  three  hundred 
millions  less.  Seven  tenths  of  these  stocks  pay 
no  dividends;  one  fifth  of  the  bonds  pay  no  inter- 
est. Such  frightful  losses  of  income  can  not  but 
curtail  wages.  Investors  have  become  indiffer- 
ent to  profit  if  they  can  only  find  safety.  But 
safety  is  exactly  what  is  threatened  by  the  prev- 
alent tendency  to  enlarge  the  functions  and  in- 
crease the  cost  of  Government.  Many  of  our 
legislatures  are  a  positive  menace  to  property. 


242  INDt'STHFAI,    lKI.i;i»nM. 

'I'licrc  arc  few  induccniciits  to  construct  new  rail- 
roads in  States  where  rates  on  existing  roads 
are  reduced  and  expenses  increased  by  statute, 
without  rej^ard  to  iucouie  or  obli}:(ations.  There 
is  httle  temptation  to  lend  j^old  on  bond  and 
uiortt^fagfe  in  communities  where  a  majority  of 
thr  people  proclaim  that  such  debts  must  be 
made  payable  in  silver.  I  low  can  prosperity  re- 
turn where  the  people  assert  their  purpose  to 
couiiscate  wealth,  and  legislatures  carry  confis- 
cation into  effect? 

Men  are  now  arranging  their  affairs  with  ref- 
erence to  the  culmination  of  this  theory  of  gov- 
ernment. They  fear  that  the  twentieth  centur)- 
may  be  ushered  in  by  a  gigantic  act  of  repudia- 
tion by  the  American  republic.  But  while  these 
fears  have  been  chilling  enterprise,  destroying  in- 
come, and  reducing  wages,  our  public  expendi- 
ture steadily  grows.  The  revenue  produced  by 
increasing  and  multiplying  taxes  is  all  spent; 
more  offices  are  created,  salaries  raised,  pensions 
granted,  and  indebtedness  increased.  Vet,  if 
any  serious  attempt  were  made — and  it  never 
has  been  made — to  show  that  the  greater 
part  of  the  wealth  taken  by  our  governments 
from  their  subjects  is  spent  in  such  a  way  as  to 
iinjirove  the  condition  of  the  common  people  so 
much  as  it  would  be  improved  if  this  wealth  were 


CONCLUSION.  243 

left  in  the  hands  of  its  producers,  such  attempt 
would  result  in  miserable  failure.  Until  the  at- 
tempt is  successfully  made,  the  expectation  of 
bettering  the  status  of  the  poor  by  enlarging 
the  functions  of  Government  should  be  aban- 
doned by  every  sincere  reformer. 

Undoubtedly  the  profuse  expenditure  of  many 
wealthy  persons  for  purposes  deemed  selfish  or 
wasteful  by  large  numbers  is  a  cause  of  exasper- 
ation and  discontent.  On  the  other  hand,  the 
extravagant  indulgence  by  many  of  the  poor  in 
alcoholic  drink  may  seem  to  deserve  reproba- 
tion. In  neither  case  is  there  any  ground  for 
denouncing  whole  classes  of  people  because  of 
the  misconduct  of  some  of  their  members.  If 
we  could  legislate  against  wicked  rich  people 
alone,  or  against  bad  uses  of  property  by  the 
rich  alone,  something  might  be  accomplished; 
but  no  such  discriminations  are  practicable.  The 
law  can  take  cognizance  only  of  outward  acts, 
and  not  of  sentiments.  If  the  bad  rich  people 
outnumbered  the  good  rich  people,  it  might  seem 
desirable  to  take  promiscuous  vengeance — in  the 
spirit  of  that  Christian  bishop  who,  according  to 
the  story,  cried  out  in  an  assault  on  a  town  occu- 
pied chiefly  by  heretics:  "Slay  them  all!  God 
will  know  his  own!  "  But  the  list  of  the  known 
benefactions  of  the  wealthy  is  so  long,  and  the 


244  INDUSTKIAI.    I  KI.KDO.M. 

evidence  of  liicir  sccrcl  Lciicfaclions  is  so  mani- 
fold, as  to  make  it  im|)ossihlc  not  to  believe  that 
tlu'ic  arc  more  };ood  rich  jicople  than  bad  ones. 
While  ue  may  deplore  the  waste  of  wealth  by 
the  idle  and  vicious  and  selfish  rich,  it  seems  vain 
to  express  our  disapproval  by  measures  that  will 
cripple  the  active  and  virtuous  and  unselfish  rich, 
and  with  them  those  of  moderate  means. 

Waste  for  waste,  orgy  for  orgy,  corruption 
for  corruption,  our  legislators  and  their  de- 
pendents and  lobbyists  can  fairly  rival  our  men 
of  large  fortunes,  and  to  increase  the  present  op- 
portunities for  blackmail  and  plunder  would  not 
improve  the  morals  of  the  community.  The  vices 
of  the  rich  may  not  lose  their  evil  by  losing  their 
grossness;  but  the  aspects  of  vice  which  mani- 
fest themselves  about  the  halls  of  our  rulers 
are  at  least  no  more  attractive.  Loud  com- 
plaints arise  from  the  occupants  of  these  halls 
over  the  bribery  and  corruption  which  they 
sufTer  at  the  hands  of  unscrupulous  corpora- 
tions; the  virtue  of  legislatures,  it  seems,  is 
quite  unable  to  resist  the  blandishments  of  licen- 
tious w^ealth.  Our  legislators  apparently  sup- 
pose that  their  weakness  is  nothing  discredita- 
ble. They  take  it  as  a  matter  of  course  that  if 
bribes  are  offered  them  they  must  accept,  and 
thev  unbhishintjlv  invcicfh   acrainst   the   wicked- 


CONCLUSION.  245 

ness  of  their  tempters.  They  occupy  the  posi- 
tion of  that  French  deputy  who,  according  to 
the  story,  told  his  constituents  that  the  corrupt 
influences  in  the  Chamber  were  so  potent  as  to 
overcome  even  his  own  virtue. 

No  more  grotesque  attempt  to  arouse  the 
righteous  wrath  of  honest  citizens  was  ever  made 
than  these  appeals  to  the  people  by  their  chosen 
representatives.  They  cry  out  in  public  because 
of  their  outraged  honour,  but  their  private  com- 
plaints arise  from  disappointed  greed.  They  do 
not  deny,  but  in  their  own  sessions  openly  pro- 
claim that  they  are  venal.  Doubtless  the  tempta- 
tion of  a  large  bribe  is  very  great,  and  we  know 
that  genuine  integrity  is  a  rare  thing  among  men. 
But  at  all  events,  if  the  virtue  of  legislators  is 
so  frail  as  to  be  unable  to  resist  the  present 
temptations,  it  can  not  be  expected  to  withstand 
them  when  they  are  increased.  The  whole  lesson 
of  our  legislative  history  is  that  the  powers  of 
such  representatives  as  our  system  of  govern- 
ment gives  us  should  be  restricted  and  not  en- 
larged. They  have  been  so  unfaithful  in  a  few 
things  that  it  is  folly  to  make  them  rulers  over 
many  things. 

Moreover,  it  is  of  the  very  essence  of  ethics 
to  substitute  reason  for  authority,,  persuasion  for 
force.     It  is  better  to  induce  men  to  act  in  par- 


24^  INDUSTRIAL    FRl.KDoM. 

ticiilar  ways  by  their  (nvii  choice  than  to  ohH^c 
them  so  to  act  by  law.  It  is  better  to  cstabhsh 
conditions  of  business  that  shall  enable  honour- 
able and  conscientious  men  to  engajjc  in  it  than 
by  vexatious  interference,  inf|uisitorial  taxation, 
and  i)ractical  blackmail  to  throw  it  into  the  hands 
of  unscrupulous  speculators.  There  is  no  dearth 
of  reforms  which  would  command  the  support 
of  nearly  all  public-spirited  citizens.  The  list  of 
abuses  is  long  enough  to  occupy  all  the  energies 
and  to  arouse  all  the  enthusiasm  of  the  most 
ardent  friend  of  humanity.  There  is  work  enough 
to  do  in  directions  in  which  the  support  of  the 
benevolent  can  be  enlisted,  work  which  can  not 
be  done  unless  this  support  is  obtained,  to  make 
it  in  the  highest  degree  unfortunate  for  the 
progressive  impulse  to  be  diverted  to  the  advo- 
cacy of  schemes  that  will  encounter  the  unflinch- 
ing opposition  of  great  numbers  of  most  intelli- 
gent and  conscientious  people. 

No  one  can  deny  that,  in  the  last  resort,  so- 
cial improvement  must  come  through  the  in- 
crease of  integrity  and  honesty  among  men.  Xo 
amount  of  mechanical  ingenuity  in  the  con- 
struction of  laws  will  avail  in  the  absence  of  this 
foundation.  But  there  is  little  probability  that 
honesty  will  increase  when  the  principle  of  re- 
gard for  property  and  respect  for  existing  rights 


CONCLUSION.  247 

ceases  to  be  cherished.  If  we  devote  ourselves 
to  arraignments  of  the  social  system  and  to  plans 
for  the  redistribution  of  wealth  by  law,  we  in- 
evitably undermine  that  sentiment  of  reverence 
that  is  the  basis  of  integrity.  It  is  like  reading 
books  that  extenuate  unchastity;  we  may  not 
become  unchaste,  but  the  horror  of  unchastity 
is  diminished,  and  we  may  at  last  cry  out  with 
Renan,  "  Perhaps,  after  all,  chastity  is  a  mis- 
take! " 

So  long  as  a  man  stands  in  awe  of  the  sim- 
ple precept,  "  Thou  shalt  not  steal,"  he  will  be  up- 
right and  hate  dishonesty.  When  he  occupies 
his  mind  with  arguments  showing  that  it  is  not 
stealing  to  confiscate  wealth  acquired  under  ex- 
isting standards  of  justice,  because  these  stand- 
ards are  not  ideal,  he  is  in  danger  of  falling.  If 
the  mass  of  our  people  were  consumed  with  the 
desire  for  righteousness,  and  insisted  on  strictly 
honourable  dealings,  most  of  our  evils  would  be 
quickly  remedied,  and  prosperity  would  be  con- 
tinuous. Seeking  first  the  kingdom  of  God,  all 
these  things  would  be  added  unto  us.  But  the 
movement  toward  socialism  has  no  tendency  to 
promote  a  stern  integrity.  It  signifies,  to  every 
one  who  joins  in  it,  not  that  he  should  reform 
himself,  but  that  he  should  restrain  others  from 

misconduct.     Such  restraint  is  doubtless  neces- 
17 


248  INDUSTRIAL    FRKF.DOM. 

sary,  but  self-restraint  is  for  ordinary  people  the 
prime  re(|iiirenient.  Ideals  that  do  not  make  it 
proiiiinenl  are  dangerous  ideals  in  a  democracy. 
A  great  responsibility  rests  on  that  class  of 
our  citizens  which  is  both  conscientious  and  cul- 
tivated. 'J'hey  have  leisure  to  devote  to  the 
service  of  society,  and  they  have  the  disposition 
to  so  devote  it.  To  a  large  extent  they  are  at 
I)rcsent  captivated  by  socialistic  ideals,  or  at  least 
inclined  to  resort  to  socialistic  remedies.  If  the 
arguments  above  set  forth  are  sound,  every  step 
in  tills  direction  is  a  step  backward.  As  a  com- 
plete system,  socialism  will  not  be  established; 
civilization  will  collapse  first.  Ikit  the  movement 
in  that  direction,  even  if  eventually  arrested,  will 
leave  ineradicable  traces.  It  will  leave  laws  that 
can  hardlv  be  rejiealcd,  institutions  that  will  be 
permanently  mischievous,  debts  that  will  burden 
children  yet  unborn.  It  will  weaken  the  sense 
of  personal  responsibility  while  strengthening  the 
spirit  of  envy;  and  the  growth  of  this  spirit  is 
the  greatest  danger  that  threatens  the  future 
of  the  Republic. 


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There  are  two  ideas  which  run  through  this  book.  One  of  the 
most  characteristic  phases  of  life  in  the  West  is  the  movement  of  its  people, 
particularly  of  its  young  men.  The  latter  are  always  on  the  road  to  college, 
to  the  city,  to  places  farther  west.  On  the  way  a  woman's  face  often  causes 
the  young  man  to  pause,  turn,  and  perhaps  remain.  This  motive  underlies 
the  book.  On  her  part,  the  woman  finds  a  peculiar  fascination  in  the  pass- 
ing of  the  stranger  and  the  effect  upon  her  life.  A  deeper  interest  still  is 
suggested  in  the  proem  and  elsewhere  in  the  book.  "  Wayside  Courtships  " 
will  be  found  to  be  a  most  significant  expression  of  the  author's  strong 
and  individual  talent. 


J 


'ASON  ED  WARDS.     An  Average  Man. 


'The  average  man  in  the  industrial  ranks  is  presented  in  this  story  in  as  life- 
like a  manner  as  Mr.  Bret  Harte  presenfd  the  men  in  the  California  mining  camps 
thirty  years  ago.  ...  A  story  which  will  be  read  w  ith  absorbing  interest  by  hun- 
dreds of  workingraen." — Boston  Herald. 


A 


MEMBER   OF   THE   THIRD  HOUSE.     A 

Story  of  Political  Warfare. 

"The  work  is,  in  brief,  a  keen  and  searching  study  of  lobbies  and  lobbyists.  At 
least.  It  is  the  lobbies  that  furnish  its  motive.  For  the  rest,  the  story  is  narrated  with 
much  power,  and  the  characters  of  Brennan,  the  smart  wire-puller,  the  millionaire  Davis, 
the  reformer  Tattle,  and  Evelyn  Ward  are  skillfully  individualized.  .  .  .  JMr.  Garland's 
people  have  this  peculiar  characteristic,  that  they  have  not  had  a  literary  world  made 
for  them  to  live  in.  They  seem  to  move  and  act  in  the  cold,  gray  light  of  reality,  and 
in  that  trying  light  they  are  evidently  human." — Chicago  Record. 


A 


SPOIL   OF  OFFICE.     A    Story  of  the  Modern 

West. 

"  It  awakens  in  the  mind  a  tremendous  admiration  for  an  artist  who  could  so  find 
his  way  through  the  mists  of  familiarity  to  an  artistic  haven.  ...  In  reading  '  .A  Spoil 
of  Office'  one  feels  a  continuation  of  interest  e.xtending  from  the  fictional  into  the 
actual,  with  no  break  or  divergence.  And  it  seems  to  be  only  a  question  of  waiting  a 
d.<y  or  two  ere  one  will  run  up  against  the  characters  in  real  life." 

ALSO  , 

LITTLE  NORSK ;  or,  01  Pafs  Flaxen.     i6mo. 
Boards,  50  cents. 

"True  feeling,  the  modesty  of  Nature,  and  the  sure  touch  of  art  are  the  marks  of 
tWs  pure  and  graphic  story,  which  has  added  a  bright  leaf  to  the  author's  laurels." — 
Chicago  Tribune. 

"  A.  delightful  story,  full  of  humor  of  the  finest  kind,  genuine  pathos,  and  enthralling 
in  its  vivid  human  interest." — London  Academy. 


A 


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PLEA  FOR  LIBERTY.     An  Argument  against 

Socialism  and  Socialistic  Lc(;isl.ition  :    Conhisting  of  Etsays  hy 

various  writers,  with  an    Introduction    by    lltkliKRT  Si'KNCEK. 

Kditcd  by  'llioinas   Mackay,  author  of  "The   Knglish   I'oor." 

8vo,     Cloth,  $2.25. 
"  Tlii^  book  i«  a  nio^t  eloquent  and  comprelicn^ivc  artcnmcnt  aKaintI  Kovctnmcnial 
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POLICY  OF  FREE  EXCHANGE.  Essays  by 
Various  Writers,  on  the  Mcononiical  and  Social  Aspects  of  Free 
Exchange  and  Kindred  Subjects.  Edited  by  Tmomas  Mackay, 
editor  of  "  A  I'lea  for  Liberty."     8vo.     Cloth,  S4.<X). 

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not  coercive  combination,  is  the  safest  rule  of  guidance." — \fw  York  Journal  0/ 
Commtrct. 

PRINCIPLES  OF  POLITICAL  ECONOMY,  with 

J-  some  of  their  Applications  to  Social  Philosophy.  liy  John  Stu- 
art Mill.  2  vols.  8vo.  Cloih,  I4.00;  half  calf,  extra  fS.oa 
The  "  Principles  of  Political  F.conomy  "  is  an  orderly,  symmctncal,  and  lucid  expo- 
sition of  (he  science  in  its  present  advanced  slate.  In  extent  of  information,  breatith  of 
treatment,  pertinence  of  fresh  illustration,  and  .iccommodaiion  to  the  present  wants  of 
the  statesman,  the  merchant,  and  the  social  philosopher,  this  work  is  unnvaled.  It  is 
written  in  a  luminous  and  smooth  yet  clear-cut  style;  and  there  is  diffused  over  it  a 
soft  atmosphere  of  feeling,  derived  fr>m  the  author's  unaffected  humanity  and  enlighu 
ened  interest  in  the  welfare  of  the  masses. 

J\yf ILL'S  PRINCIPLES  OF  POLITICAL  ECON- 

•LVA  OMY.  Abridged,  with  Critical,  Bibliographical,  and  Explan- 
atory Notes,  and  a  Sketch  of  the  History  of  rolitical  Economy. 
By  J.  Laurenck  Laughlin,  Ph.  D.,  Assistant  Professor  of 
Political  Economy  in  IIar\'ard  University.  With  24  Maps  and 
Charts.     A  Text-Book  for  Colleges.     Svo.     Cloth,  i^3. 50. 

"An  experience  of  five  years  with  Mr.  Mill's  treatise  in  the  cla!>sroom  not  only 
convinced  me  of  the  great  usefulness  of  what  still  remains  one  of  the  most  lucid  and 
systematic  books  yet  published,  but  I  have  also  been  convinced  of  the  need  r.f  such 
additions  as  should  give  the  results  of  later  thinking  without  militating  against  the 
general  tenor  of  Mr.  Mill's  system;  of  such  illustrations  as  should  fit  it  better  for 
American  students  ;  of  a  bibliography  which  should  make  it  easier  to  get  at  the  writers 
of  other  schools,  who  offer  opposing  views  on  controverted  (questions;  and  of  some 
attempts  to  lighten  those  parts  of  his  work  in  which  Mr.  Mill  frightened  away  the 
reader  by  an  appearance  of  too  great  abstractness,  and  to  render  them,  if  possible,  more 
easy  of  comprehension  to  the  student  who  first  approaches  political  economy  through 
tliis  author." — From  tlu  Frefuce. 


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D.   APPLETON  &   CO.'S  PUBLICATIONS. 

r^HAPTERS  IN  POLITICAL  ECONOMY.     By 
^-^      Albert  S.  Bolles,  Lecturer  on  Political  Economy  in  the  Bos- 
ton University.     Square  i2mo.     Cloth,  $1.50. 

Contents. — The  Field  and  Importance  of  Political  Economy  ;  The  Pay- 
ment of  Labor  ;  On  the  Increase  of  Wages  ;  Effect  of  Machinery  on  Labor  ; 
On  the  Meaning  and  Causes  of  Value  ;  A  Measure  of  Value  ;  Money  and  its 
Uses  ;  Decline  in  the  Value  of  Gold  and  Silver  ;  The  Money  of  the  Future ; 
The  Good  and  Evil  of  Banking  ;  The  Financial  Panic  of  1S73  ;  Relation  of 
Banks  to  Speculators  ;  Influence  of  Credit  on  Prices  ;  On  Legal  Interference 
with  the  Loan  of  Money,  Payment  of  Labor,  and  Contracts  of  Corporations  ; 
Advantages  of  Exchange  ;    Taxation. 


P 


ROTECTION    VERSUS  FREE  TRADE.     The 

Scientific  Validity  and  Economic  Operation  of  Defensive  Duties 
in  the  United  States.  By  Henry  M.  Hoyt.  i2mo.  Cloth, 
$2.00  ;  paper,  50  cents. 

The  author  of  this  work  is  well  known  eis  formerly  Governor  of  Pennsyl- 
vania. He  appears  in  this  volume  as  a  defender  of  protection,  discussing  the 
subject  in  a  judicial  spirit,  with  great  fullness. 


P 


ROTECTION  TO  HOAIE  INDUSTRY.  Four 
Lectures  delivered  in  Harvard  University,  January,  1885.  By 
R.  E.  Thompson,  A.  M.,  Professor  in  the  University  of  Penn- 
sylvania.    8vo.     Cloth,  $1.00. 

"  In  these  lectures  Professor  Thompson  has  stated  the  essential  arguments  for  pro- 
tection so  clearly  and  compactly  that  it  is  not  strange  that  they  have  produced  a  deep 
impression.  .  .  .  The  lectures  as  printed  form  a  neat  volume,  which  all  fairly  informed 
students  may  read  with  \3x\sxe.%\.."  —Irhiladelphia  Item. 


T 


ALKS  ABO  UT  LABOR,  and  concerning  the  Evolu- 
tion of  Justice  between  Laboi-ers  and  Capitalists.  By  J.  N. 
Earned.     i2mo.     Cloth,  $1.50. 

The  author's  aim  has  been  to  find  the  direction  in  which  one  may  hope- 
fully look  for  some  more  harmonious  and  more  satisfactory  conjunction  of 
capital  with  labor  than  prevails  in  our  present  social  state,  by  finding  in  what 
direction  the  rules  of  ethics  and  the  laws  of  political  economy  tend  together. 


H 


AND  BOOK  OF  SOCIAL  ECONOMY ;  or.  The 

Worker's  ABC.     By  Edmoxd  About.     i2mo.     Cloth,  $2.00. 

Contents. — Man's  Wants  ;  Useful  Things  ;  Production  ;  Parasites  ; 
Exchange  ;  Liberty  ;  Money  ;  Wages  ;  Savings  and  Capital ;  Strikes  ;  Co- 
operation ;   Assurance,  and  some  other  Desirable  Novelties. 


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D.   Al'i'l.i KJN  &L   CO.'S  PUBLICATIONS. 

C'OC/yiL/SAf    NEW   AND    OLD.       By   Professor 
^      VVii.i.iAM  (;raiiam.     l2mo.     Cloth,  I1.75. 

"  Prof.  (fr;iliBm't  IhmiU  may  be  i-onfidcnlty  rccimmenilol  to  all  who  arr  inirrctird 
in  (lir  «l<i<ly  fif  «(H:lali^tn,  uml  nni  \n  inl<ixi<  .ilol  with  il«  promii<:«  of  a  new  hraven  and 
a  iirw  earth  a»  lo  l<c  im|>atirnl  nf  Icinpcr^lc  ami  tej»imc<l  frilici«m  " — LnmlfM   Jimtt. 

"  Altn^cihcr  Mr.  (■rahnin  hat  t;iven  ui  a  iiteful  ditciiMion,  and  one  thai  drtcrvca  to 
be  reo'l  by  ;ill  who  arc  interested  in  the  tubject."— 5i//'nrr. 

"  I'rof.  (Jraham  present*  an  liiitlinc  of  the  «iic'c«»ivc  »cheme«  of  lhr»—  -rr—-—  -'  o 
have  i  hi<-fly  iiilliicnccd  the  dcvclopincnl  of  »"Ci.ili<m,  and  dwells  at  l<-i  <• 

»y«lcni  of  Kiiimc^ii,  that  of  St.  Simon,  and  on   that  of  Karl  M.-ir«.  the  ■  <■ 

new  vicialitm,  '  which  h»»  uaincil  (avor  with  thr  working  cl.me*  in  all  .  i...  / 
tn"«.'  which  ajjrcc^  with  koii«cau'i  plan  in  bein^  ilcm  >cratic,  and  with  M    >ir: 
aimint;  at  collective  ownenhip.   .   .   .  The  pr»rc>sor  is  an  inde|>eiidcnl  think'^- 
endeavor  10  be  clear  has  resulted  in  ihe  <ttaicnicnl  of  dcfii  iie  con<  lusiont.     '1  hr  ir  ^,m. 
ii  a  remarkably  fair  digest  of  the  subject  under  consideration." — I'hiladtlfkia  Ltdgtr. 

r\YNAMIC  SOCIOLOGY  ;  or.  Applied  Social  Science, 

J-^    as  based  upon   Statical  Sociology  and  the  less  Complex  Sciences. 
Hy  Lestkr  F.  Ward,  A.  M.     In  2  vols.     i2mo.     Cloth,  $5.00. 

"A  bonk  that  will  amply  repay  perusal.  .  .  .  KecognixinK  the  danger  in  which 
(nciology  is.  of  f.illinK  into  the  class  of  dead  sciences  or  polite  amusements,  Mr  Ward 
has  iinilertaken  lo  '  point  out  a  method  by  which  the  breath  of  life  can  be  breathed  into 
its  nostrils.'  "-    l\i<chtiter  J\>sl  Exfirtss. 

"  Mr.  Ward  has  evidently  put  K^^t  labor  and  thought  into  h'w  two  »oluroe%  and 
has  protluced  a  work  of  interest  and  importance  He  docs  not  limit  his  effort  to  a  con- 
tribulion  to  the  science  of  sociology.  .  .  .  He  believes  that  sociology  ha.s  already 
reached  the  point  at  which  it  cm  be  and  ought  to  be  applied,  treated  as  an  art,  and  he 
urncs  that  '  the  State '  or  Government  now  has  a  new,  legitimate,  and  peculiar  field  for 
the  exercise  of  intelligence  to  promote  the  wolfite  of  men." — \eiv  i'ari  Timrt. 

"  A  fundamental  discussion  of  many  of  the  most  important  questions  of  science  and 
philos'iphy  in  their  bearings  upon  social  economy  and  human  affairs  in  general.  It 
d«es  not  treat  directly  these  current  questions  in  any  department,  wnd  yet  it  furnishes 
the  basis  in  science  and  in  logic  for  the  correct  s<.luti.>n  of  nearly  all  of  them.  It  ia 
therefore  exceedingly  opportune,  a.s  there  has  never  been  a  period  in  which  greater  ac- 
tivity existed  in  the  tlirection  of  thoroughly  working  out  and  scientifically  setUiog  the 
problems  of  social,  national,  and  individual  life." — ll'ashington  ittar. 

JOREELAND:   A  Social  Anlicipation.     By  Dr.  Theo- 
■jL        dor  Hertzka.     121110.     Cloth,  $1.00. 

"A  treatise  on  social  economics  somewKit  on  the  plan  of  Bellamy's  *I.ookinK 
Backward.'  Dr.  Hertzka  has  actually  founded  a  socLilLst  colony  in  Africa.  up<>n  the 
lines  laid  down  in  this  book,  and  '  Kreeland '  is  the  imaginary  history  of  the  future  of 
the  colony.  It  will  doubtless  be  the  cause  of  much  comment  and  discussion." — Sam 
Francisco  Ex'tning  Post. 

"  A  politico-economic  romance  in  which  is  cLiborated  a  comprehensive  and  philo- 
sophic scheme  of  social  reorganization.  Its  author  is  a  Viennese  economist  of  emi- 
ncRCe.  .  .  .  Dr.  Hertzka's  conc-ption  of  an  ideal  social  state,  his  '  Anticipation '  is  well 
worth  careful  and  sympathetic  reading." — Detroit  Iribune. 

"  In  the  end  Frcchnd  reaches  a  state  of  universal  prosperity  and  contentment  now 
unheard  of.  Dr.  Hertzka  assures  the  reader  that  he  has  drawn  no  I'topia.  but  a  prac- 
ticable community,  such  as  a  sufficient  number  of  vigorous  men  can  establish  in  other 
eligible  parts  of  the  world  as  well  as  in  the  highlands  of  Africa." — Cimcim>Mti  Timet 
Star.  

New  York :  D.  APPLETON  &  CO..  72  Fifth  Avenue. 


R 


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ECENT  ECONOMIC  CHANGES,  and  their  Ef- 
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Well-being  of  Society.  By  David  A.  Wells,  LL.  D.,  D.C.  L., 
Membre  Correspondant  de  I'lnstitut  de  France;  Correspon« 
dente  Regia  Accademia  dei  Lincei,  Italia;  Honorary  Fellow 
Royal  Statistical  Society,  G.  B. ;  late  United  States  Special 
Commissioner  of  Revenue  ;  President  American  Social  Science 
Association,  etc.     i2mo.     Cloth,  $2.00. 

"A  wonderfully  wide  and  full  collection  offsets  and  figures  bearinp  on  the  question. 
It  would  be  well  if  that  part  ot  the  volume  which  specially  relates  to  the  fluctuation  of 
prices  in  recent  years  could  be  put  in  the  hands  of  every  man  whose  political  action  is 
likely  to  be  influenced  by  the  heresy  that  gold  is  becoming  scarce  and  inadequate  in 
amount  for  the  circulating  medium,  and  that  the  scarcity  is  causing  a  decline  in  prices 
measured  in  gold." — Chicago  Economist. 

"  The  book  is  the  best  contribution  Mr.  Wells  has  ever  made  to  economical  and 
statistical  and  social  science,  and  one  of  the  best  that  is  to  be  found  in  any  country  or 
.anyuage. " — ^V.   V.  Evening  Post. 

"  Mr.  Wells  deals  with  the  subject  of  recent  economic  changes  in  a  manner  alto- 
gether superior  to  anything  which  this  country  can  now  show.  For  masterly  and 
dispassionate  treatment  of  economic  facts  and  tendencies,  no  less  than  for  grasp  of 
principle,  we  must  go  to  Americans  like  Mr.  Wells  and  Mr.  Atkinson,  or  to  French 
economists  like  M.  Leroy-Beaulieu." — I\lacmillan's  Magazine,  London. 

/]    STUD  V  OF  MEXICO.      By  David  A.  Wells. 
•*^     Reprinted,    with     Additions,     from     "The    Popular    Science 
Monthly."     i2mo.     Cloth,  $1.00  ;  paper,  50  cents. 

"  Several  efforts  have  been  made  to  satisfy  the  growing  desire  for  information  re- 
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satisfactory  on  the  score  of  knowledge  and  trustworthuiess  as  is  this  one." — New  York 
Sun. 

"...  Mr.  Wells  is  the  first  traveler  who  brings  to  bear  upon  the  subject  a  mind 
thoroughly  trained  in  the  observation  and  discussion  of  finance,  manufactures,  agri- 
culture, the  question  of  labor  and  wages,  and  other  practical  issues,  which  are  of  great 
importance  and  interest  in  estimating  the  present  and  future  of  Mexican  institutions." 
— New  York  Journal  of  Commerce. 


T 


HINGS    NOT    GENERALLY    KNOWN;    A 

Popular  Hand-Book  of  Facts  not  readily  accessible  in  Literature. 

History,   and  Science.     Edited   by   David  A.  Wells.     i2mo. 

Cloth,  $1.75. 

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and  ordinary  hand-books,  and  which  are  not  readily  found  when  sought." 


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I).   AIMM.fnON   AND  COMPANY'S  PUBLICATIONS. 


'J^JIE  MOyKTARY  AND  BANKING  PKOIi- 
■*       LKAf.     By  L()(;an  G.  McI'mhrson.     i2mo.     Cloth,  ^|i.fx>. 
This  bf>()k  is  writ  adaptrH  to  pivc  any  rearlcr  a  rlrar  unrlrrMandinj;  of  the 
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ions upon  the  pliasvii  of  tin.-  (|Ui-stion  that  arc  Living  so  widely  discu&Mrd. 

/CURRENCY    AND    BANKING.     By     Bonamv 

^-^      Prick,    Professor  of    Political    Economy    in    the  University  of 

Oxford.     i2mo.     Cloth,  $1.50. 

"The  iilc.i  that  the  (Jovernmcnt  sinmp  on  the  coin  K've«  to  money  iu  rahie,  lh« 
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M  timely." — ^'e-ut-EnglanJtr. 

piAT   MONEY  IN  ELATION   IN   FRANCE: 

•*■  IIoxo  it  Came,  What  it  Rrought,  and  Jfow  it  Ended,  By 
Andrew  D.  Wihtk,  LL.  D.  (Vale),  L.  H.  D.  (Columbia), 
Ph.  Dr.  (Jena),  late  President  and  Professor  of  History  at  Cor- 
nell University.  To  which  is  added  an  extract  from  Macaulay 
showing  the  results  of  tampering  with  the  currency  in  England. 
l2mo.     Paper,  25  cents. 

OMISMA  J  or,  "  Lci^al  Tetiderr     By  Henri  Cer- 

NUSCHI,  author  of  "Bi-Metallic  Money."     i2mo.     Cloth,  $1.25. 

CONTENTS. — Evidence  given  before  the  I'nited  States  Monetary  Commissi'in, 
by  the  author  and  others,  F^ebruary  s,  6,  7,  and  8,  1877;  Monetary  Pacification  by  the 
Rehabilitation  of  Silver;  Silver  Vindicated  ;   Appendix. 

'HE  FARMER'S  SIDE.     By  Hon.  W.  A.  Peffer, 

United  States  Senator  from  Kansas.     i2mo.     Cloth,  $1.00. 

"  This  politico  economical  trentise  discusses  such  subjects  as  the  General  Average 
Progress  of  the  Country,  the  Progress  of  Agriculture,  the  .Mortg.ige  Burden,  the 
Changed  Condition  "f  the  Farmer,  the  Farmer's  Comi'etitors,  the  ."settlement  of  the 
New  West,  the  Destroying  Power  of  Usury,  Contrnction  of  the  ("urrency.  etc.  These 
are  all  stirring  questions  of  the  day,  and  .Senator  PefTer  states  his  side  quite  clearly. 
'J'he  book  will  be  of  great  interest  to  politicians  and  politico-economists  generally.' — 
Rochester  Union  and .■idvertiser. 

(^ELECTED   SPEECHES  AND  REPORTS  ON 

^  FLV.IXCE  AXD  TAX  A  T/OX,  F/i'O.V  iSjQ  TO  1S7S.  By 
John  Sherman,  Secretar)' of  the  Treasury.    8vo.     Cloth,  $2.5a 

"  Wh.itevcr  opinions  sound  thinkers  may  entertain  with  respect  to  some  of  the  doc- 
trines which  Mr.  Sherman  has  upheld  upon  occasion,  there  is  no  man  in  the  country 
whose  ovMuions  with  respect  to  financial  matters  are  subjects  of  greater  interest  than  are 
Mr.  Sherman's." — New  York  Evening  Post. 

D.  APPLETON   AND   COMPANY.  NEW  YORK. 


N 


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p 


D.  APPLETON  &   CO.'S  PUBLICATIONS. 


UBLIC  DEBTS :  An  Essay  in  the  Science  of  Finance. 
By  Henry  C.  Auams,  Ph.  D.,  of  the  University  of  Michigan, 
and  Cornell  University.     8vo.     Cloth,  $2.50. 

CONTENTS. — Part  I.  Public  Borrowing  as  a  Financial  Policy.  Modem 
Public  Debts;  Political  Tendencies  of  Public  Debts;  Social  Tendencies  of  Pubiic 
Debts;  Industrial  Effects  of  Public  Borrowing;  When  may  States  Borrow  Money?— 
Part  II.  National  Deficit  Financiering,  l-inancial  xManagement  of  a  War;  Clas- 
sification of  Public  Debts;  Liquidation  of  War  Accounts;  Peace  Management  of  a 
Public  Debt;  Payment  of  Public  Debt=. — Part  III.  Local  Deficit  Financiering. 
Comparison  of  Local  with  National  Debts;  State  Indebtedness  between  1830  and 
1850;  Municipal  Indebtedness;  Policy  of  Restricting  Governmental  Duties. 

"Dr.  Adams  has  rendered  an  important  service  in  this  painstaking  treatise,  both  to 
financial  science  in  general  and  to  American  financial  history  in  particular.  Ihe  social, 
political,  and  industrial  effects  of  public  borrowing  and  of  interest  paying  are  methodi- 
cally unfolded.  The  mysteries  and  sophisms  that  have  grown  up  like  weeds  about  public 
debts  are  cleared  away  in  language  addressed  to  scholars,  but  not  too  recondite  to  be 
understood  by  any  reader  of  fair  education." — New  York  Evening  Tost. 

"  Thoroughly  admirable  in  its  care  and  detail,  and  altogether  the  worthiest  of  recent 
publications  on  economics." — Boston  Conunercial  Bulletin. 


M 


ONEY  AND  THE  MECHANISM  OF  EX- 
CHANGE. By  W.  Stanley  Jevons,  Professor  of  Logic  and 
Political  Economy  in  Owens  College,  Manchester.  i2mo. 
Cloth,  $1.75. 

"  Prof.  Jevons  writes  in  a  sprightly  but  colorless  style,  without  trace  of  either  preju- 
dice or  mannerism,  and  shows  no  commitment  to  any  theory.  The  time  is  not  ver\'  far 
distant,  we  hope,  when  legislators  will  cease  attempting  to  legislate  upon  money  before 
they  know  what  money  is  ;  and,  as  a  possible  help  toward  such  a  change,  Prof  Jevons 
deserves  the  credit  of  having  made  a  useful  contribution." — New  i'ori  Fitiancier. 

"The  author  offers  us  what  a  clear-sighted,  cool-headed,  scientific  student  has  to 
say  on  the  nature,  properties,  and  natural  laws  of  money,  without  regard  to  local  in- 
terests or  national  bias.  His  work  is  popularly  written,  and  every  page  is  replete  with 
solid  instruction  of  a  kind  that  is  just  now  lamentably  needed  by  multitudes  of  our 
people  who  are  victimized  by  the  grossest  fallacies." — Popular  Science  Monthly. 


E 


LEMENTS  OF  ECONOMICS.  By  Henry  Dun- 
ning MACLEOD,  M.  A.,  Barrister-at-Law,  selected  by  the  Royal 
Commissioners  for  the  Digest  of  the  Law  to  prepare  the  Digest 
of  the  Law  of  Bills  of  Exchange,  Bank  Notes,  etc.  Lecturer 
on  Political  Economy  in  the  University  of  Cambridge.  In  two 
vols.     i2mo.     Cloth,  $1.75  each. 

"The  author  attempts  to  establish  an  exact  science  of  economics  on  a  mathematical 
basis — to  establish  'anew  inductive  science';  and  he  presents  what  he  calls  'a  new 
body  of  phenomena  brought  under  the  dominion  of  mathematics.'  " — New  York  World. 

"  A  work  which  is  destined  to  be  of  inestimable  value  to  publicists  and  students. 
Mr.  MACLEOD  treats  of  the  relation  between  value  and  quantity  of  labor  and  cost  of 
production,  holding  that  the  relation  between  supply  and  demand  is  the  sole  regulator 
of  value,  and  that  value  is  the  inducement  to  the  production  of  profits." — St.  Louis 
Republican. 

New  York:  D.  APPLETON  &  CO..  72  Fifth  Avenue. 


I).  Ai'pi  i;roN  &  co.'s  publications. 

-y^/Z/r  HISTORY  OF  BIMETALLISM  IN  THE 
J       I  XriKD  STATES.     By  J,  Lai'RPNcf.  Lai;(;iii.in,  I'h.  D., 
Assistant  I'rofcssor  of  Political   Economy  in  Harvard  Universi- 
ty ;  author  of  "  The  Study  of  I'olitical   Kconomy,"  etc.     With 
Sixteen  Charts  and  numerous  Tahlcs.     8vo.     Cloth,  $2  25. 

"  Prof.  I^iishlin's  excellent  wirk  ix  timely  and  valuable.  It  rc-enf"rcei  the  lUKKC*- 
linni  of  political  MKacily  anil  butincM  prudence  by  the  warning*  of  icicnufic  invcsUg*- 
li(in  and  (orcjight." — ArK»  \  ork  'Jimti. 

"  The  bonk  i*  n»t  a  Ircaii'c  on  the  tlicory  of  kimrtaltium,  but  i%  a  history  of  bimetaU 
listn,  tlic  tlirory  bcinf;  <liscii\«eil  only  so  far  a%  the  h;itd  facts  in  the  coiinlry'i  experience 
have  directly  bume  upon  tome  part  of  the  theory." — Chitago  Evtning  "Journal. 

F 


F 


^INANCIAL    HISTORY    OF    THE    UNITED 

ST  A  TES,  FROM  1774  TO  17  S(),  embracing  the  J'friodoJ  the 
AnifrUtin  Revolution.  New  edition,  thoroughly  revised.  By 
Al.HF.RT  S.  Boi.i.ES,  Professor  in  the  Wharton  School  of  Finance, 
University  of  Pennsylvania  ;  Editor  of  "  The  Banker's  Maga- 
zine."    8vo.     Cloth,  $2.50. 

INANCIAL    HISTORY    OF    THE    UNITED 

STATES,  FROM  lySg  TO  1S60.  By  Albert  S.  Bolles. 
8vo.     Cloth,  $3.50. 


F 


'INANCIAL  HISTORY  OF  THE  UNITED 
STATES,  FROM  iS6t  TO  /8Sj.  By  Albert  S.  Bolles. 
8vo.     Cloth,  $3.50. 

"The  difTicuhics,  dancers,  and  triumphs  of  the  Government's  fiscal  operations  early 
in  the  war  are  well  portrayed,  and  the  wonderful  course  of  the  dcbt-pasing  ouihnco. 
Tlic  inception  and  fr>crcss  of  the  national  banks  are  described;  also  the  -ystcm  of 
internal  taxation,  the  tariff,  the  whisky  frauds,  etc.  The  book  \s  the  Lest  financial  his- 
tory the  country  has  thus  far." — Chicago  Tribune. 

"These  volumes  have  been  accepted  as  standard  authorities  on  the  subject-matter 
treated,  both  in  this  country  and  in  Europe.  \Vc  are  thus  put  in  possession  of  tlie 
entire  facts  in  the  fiscal  policies  of  the  latest  bom  among  the  naiions  ol  t}ie  earth.  It  it 
manifest  that  they  must  embrace  a  mass  of  events  whiih  in  their  relations  ard  sequence 
are  of  the  highest  interest  and  value  to  the  student  of  human  society." — }  hiUidelfhui 
Times. 


A 


CRITICAL  EXAMINATION  OF  OUR  FI- 
NANCIAL POLICY  DURING  THE  SOUTHERN  RE 
BELLION.     By  Simon  Newcomb.     i6mo.     Cloth,  $1.00. 

"  The  objects  of  the  essay  arc  to  trace  our  present  financial  system  to  its  effects  on 
ihe  power  of  our  Government,  the  permanence  of  our  instituti'>ns  the  Aiturc  wcII-V<inff 
of  society,  and  other  great  national  interests;  to  show  how  certain  principles  of  s<'<-ial 
Muence  are  illustrated  in  its  workings;  and  incidentally  to  inquire  in  what  ways  it  may 
be  improved." — From  the  Trtjtue. 

New  York :  D.  APPLETON  &  CO..  72  Fifth  Avenue. 


D.   APPLETON    &    CO.'S    PUBLICATIONS. 


IS  TOR  Y  OF  THE  PEOPLE 

OF   THE    UNITED    STATES, 

from   the    Revolution    to   the    Civil 

War.     By  John  Bach  McMaster, 

To   be    completed   in    six   volumes. 

Vols.  I,  II,  III,  and  IV  now  ready. 

8vo.     Cloth,  gilt  top,  $2.50  each. 

"...  Prof.  !\IcMaster  has  told  us  what  no  other 
historians  have  told.  .  .  .  The  skill,  the  animation,  the 
brightness,  the  force,  and  the  charm  with  which  he  ar- 
rays the  facts  before  us  are  such  that  we  can  hardly 
conceive  of  more  interesting  reading  for  an  American 
citizen  who  cares  to  know  the  nature  of  those  causes 
which  have  made  not  only  him  but  his  environment 
and  the  opportunities  life  has  given  him  what  they  are." 

JOHN    DACH    MCMASTER.  — ^-   V-    Times. 

"Those  who  can  read  between  the  lines  may  discover  in  these  pages  constant 
evidences  of  care  and  skill  and  faithful  labor,  of  which  the  old- time  superficial  essay- 
ists, compiling  library  notes  on  dates  and  striking  events,  had  no  conception;  hut 
to  the  general  reader  the  fluent  narrative  gives  no  hint  of  the  conscientious  labors, 
far-reaching,  world-wide,  vast  and  yet  microscopically  minute,  that  give  the  strength 
and  value  which  are  felt  rather  than  seen.  This  is  due  to  the  art  of  presentation. 
The  author's  position  as  a  scientific  workman  we  may  accept  on  the  abundant  tes- 
timony of  the  experts  who  know  the  solid  worth  of  his  work;  his  skill  as  a  literary 
artist  we  can  all  appreciate,  the  charm  of  his  style  being  self-evident." — Fkiladelphia 
Telegraph. 

"  The  third  volume  contains  the  brilliantly  written  and  fascinating  story  of  the  prog- 
ress and  doings  of  the  people  of  this  country  from  the  era  of  the  Louisiana  purchase 
to  the  fipening  scenes  of  the  second  war  with  Great  Britain — say  a  period  of  ten  years. 
In  every  page  of  the  book  the  reader  finds  that  fascinating  flow  of  narrative,  that 
clear  and  lucid  style,  and  that  penetrating  power  of  thought  and  judgment  which  dis- 
tinguished the  previous  volumes." — Columbus  State  Journal. 

"  Prof.  McMaster  has  more  than  fulfilled  the  promises  made  in  his  first  volumes, 
and  his  work  is  constantly  growing  better  and  more  valuable  as  he  brings  it  nearer 
to  our  own  time.  His  style  is  clear,  simple,  and  idiomatic,  and  there  is  just  enough 
of  the  critical  spirit  in  the  narrative  to  guide  the  reader." — Boston  Herald. 

"Take  it  all  in  all,  the  History  promises  to  be  the  ideal  American  history.  Not  so 
much  given  to  dates  and  battles  and  great  events  as  in  the  fact  that  it  is  like  a  great 
panorama  of  the  people,  ravealin;;  their  inner  life  and  action.  It  contains,  with  all  its 
sober  facts,  the  spice  of  personalities  and  incidents,  which  relieves  every  page  from 
dullness. "^C/j/V^^o  Inter-Ocean. 

"  History  written  in  this  picturesque  style  will  tempt  the  most  heedless  to  read. 
Prof.  McMaster  is  more  than  a  stylist ;  he  is  a  student,  and  his  History  abounds  in 
evidences  of  research  in  quarters  not  before  discovered  by  the  historian." — Chicago 
Tribune. 

"  A  History  sui  generis  which  has  made  and  will  keep  its  own  place  in  our  litera- 
ture."— New  York  Exiening  Post, 

"His  style  is  vigorous  and  his  treatment  candid  and  impartial." — New  York 
Tribune. 


New  York  :  D.  APPLETON  &  CO.,  72  Fifth  Avenue. 


T 


I).   AF'PLETON  &  CO.'S  PUBLICATIONS. 


HE  RISE  AND  GROWTH  OF  THE  ENG- 
LISH NA  TION.  With  Special  Reference  to  Kpochs  and 
Crises.  A  History  of  and  for  the  I'tople.  iJy  W.  II.  S. 
AuiiRKY,  LL.  D.     In  'llirec  Volumes.     lamo.     Cloth,  14.50. 

"  'Die  merit  of  this  wnrk  is  intrinsic.  It  rests  on  the  broad  intelligence  and  inie 
phili>Mi|>liy  of  the  mctliii<]  employed,  .ind  the  tolicrcnty  and  accuracy  of  the  resnlis 
rc.-iclicd.  Tlic  scope  of  the  work  is  marvelous.  Never  was  tlicrc  more  crowded  mto 
three  Miiall  vohimi.s.  lliii  the  saving  of  spiicc  is  not  l,y  the  sacrifice  of  substance  or 
of  style.  The  broadest  view  of  the  facts  and  forces  embrai.e<l  by  the  subject  it  exhibited 
with  a  cIc.Trness  of  .irrangcmcnt  and  a  dcfiniicness  ol  application  that  render  it  per- 
ceptible to  the  simplest  apprehension." — tittv  York  Mail  anj  Expttit. 

"  A  useful  and  thorough  piece  of  work.  One  of  the  best  treatises  which  the 
general  reader  can  use." — LondoH  Daily  Chronicle. 

"  Conceived  in  a  popular  spirit,  yet  with  strict  regard  to  the  modem  standards, 
The  title  is  fully  borne  out.     No  want  of  color  in  the  descriptions." — Loniion  Daily 

"  The  plan  laid  down  results  in  an  admirable  English  history."— /.^jWoti  Momine 
Post. 

"Dr.  Aubrey  has  supplied  a  want  His  method  is  undoubtedly  the  right  one." — 
rail  Matt  CazelU. 

"  It  is  a  distinct  step  forward  in  history  writing :  as  far  ahead  of  Green  as  he  was  of 
Macaulay,  though  on  a  different  line.  Cireen  gives  the  picture  of  England  at  diflierent 
times — Aubrey  goes  deeper,  showing  the  causes  which  led  to  the  changes." — Nrw 
York  irorU 

"  A  work  that  will  commend  itself  to  the  student  of  history,  and  as  a  comprehen- 
sive and  convenient  reference  book." — 'J/ie  A'gonaul. 

"Cont.iins  much  that  the  ordinary  reader  can  with  difficulty  find  elsewhere  unless 
he  has  access  to  a  library  of  special  works."—  Chicago  Dial. 

"  Up  to  date  in  its  narration  of  fact,  and  in  its  elucidation  of  those  great  principles 
that  underlie  all  vital  and  worthy  history.  .  .  .  The  painstaking  division,  along  with 
the  admirably  complete  index,  will  make  it  easy  work  for  any  student  to  get  definite 
views  of  any  era,  or  any  particular  feature  of  it.  .  .  .  The  work  strikes  one  as  being 
more  comprehensive  than  many  that  cover  far  more  space." — 'J'ht  Christian  In- 
teltisencer. 

"  One  of  the  most  elaborate  and  noteworthy  of  recent  contributions  to  historical 
literature." — AVzf  Haven  Register. 

"  As  a  popular  historj'  it  possesses  great  merits,  and  in  many  particulars  is  excelled 
by  none.  It  is  full,  careful  as  to  dates,  maintains  a  generally  praiseworthy  impartiality, 
and  it  is  interesting  to  read." — Buffalo  Express. 

"  These  volumes  are  a  surprise  and  in  their  way  a  m.irvel.  .  .  .  They  constitute  an 
almost  encylopjcdia  of  English  historj',  condensing  in  a  marvelous  manner  the  facts 
and  principles  developed  in  the  history  of  the  English  nation.  .  .  .  The  work  is  one  of 
unsurpassed  value  to  the  historical  student  or  even  the  general  reader,  and  when  more 
widely  known  will  no  doubt  be  appreciated  as  one  of  the  remarkable  contributions  to 
English  history  published  in  the  century." — Chicago  Universalist. 

"  In  every  page  Dr.  Aubrey  writes  with  the  far  reaching  relation  of  contemporary 
incidents  to  the  whole  subject.  The  amount  of  matter  these  three  volumes  contain  19 
marvelous.  The  style  in  which  they  are  written  is  more  than  satisfactory.  .  .  .  The 
work  is  one  of  unusital  importance." — Hart/ord  Post. 


New  York  :   D.  APPLETON  &  CO.,  72  Fifth  Avenue. 


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D.   APPLETON  &   CO.'S  PUBLICATIONS. 

HE  BEGINNERS  OF  A  NATION.  A  History 
of  the  Source  and  Rise  of  the  Earliest  English  Settlements  in 
America,  with  Special  Reference  to  the  Life  and  Character  oi 
the  People.  The  first  volume  in  A  Historj-  of  Life  in  the 
United  States.  By  Edward  Eggleston.  Small  8vo.  Cloth, 
gilt  top,  uncut,  with  Maps,  $1.50. 

"  Few  works  on  the  period  which  it  covers  can  compare  with  this  in  point  of  mett 
literary  attractiveness,  and  we  fancy  that  many  to  whom  its  scholarly  value  will  not  ap- 
peal will  read  the  volume  with  interest  and  delight." — Nevi  York  Evening  Post. 

"  Written  with  a  firm  grasp  of  the  theme,  inspired  by  ample  knowledge,  and  made 
attractive  by  a  vigorous  and  resonant  style,  the  book  will  receive  much  attention.  It 
is  a  great  theme  the  author  has  taken  up,  and  he  grasps  it  with  the  confidence  of  a 
master." — New  York  Times. 

"Mr.  Eggleston's  'Beginners'  is  unique.  No  similar  historical  study  has,  to  our 
knowledge,  ever  been  done  in  the  same  way.  Mr.  Eggleston  -is  a  reliable  reporter  of 
facts;  but  he  is  also  an  exceedingly  keen  critic.  He  writes  history  without  the  effort 
to  merge  the  criric  in  the  historian.  His  sense  of  humor  is  never  dormant.  He  renders 
some  of  the  dullest  passages  in  colonial  annals  actually  amusing  by  his  witty  treatment 
of  them.  He  finds  a  laugh  for  his  readers  where  most  of  his  predecessors  have  found 
yawns.  And  with  all  this  he  does  not  sacrifice  the  dignity  of  history  for  an  instant" — 
Boston  Saturday  Ezienittg  Gazette. 

"The  delightful  style,  the  clear  flow  of  the  narrative,  the  philosophical  tone,  and 
the  able  analysis  of  men  and  events  will  commend  Mr.  Eggleston's  work  to  earnest 
students." — Philadelphia  Public  Ledger. 

"  The  work  is  worthy  of  careful  reading,  not  only  because  of  the  author's  ability  as  a 
literary  artist,  but  because  of  his  conspicuous  proficiency  in  interpreting  the  causes  of 
and  changes  in  American  life  and  character." — Boston  Journal. 

"  It  is  noticeable  that  Mr.  Eggleston  has  followed  no  beaten  track,  but  has  drawn 
his  own  conclusions  as  to  the  early  period,  and  they  diflfer  from  the  generally  received 
version  not  a  little.  The  book  is  stimulating  and  will  prove  of  great  value  to  the  stu- 
dent of  history." — Minneapolis  Journal. 

"A  very  interesting  as  well  as  a  valuable  book.  .  .  .  A  distinct  advance  upon  most 
that  has  been  written,  particularly  of  the  settlement  of  New  England." — Newark 
A  dvertiser. 

"  One  of  the  most  important  books  of  the  year.  It  is  a  work  of  art  as  well  as  of 
historical  science,  and  its  distinctive  purpose  is  to  give  an  insight  into  the  real  life  and 
character  of  people.  .  .  .  The  author's  style  is  charming,  and  the  history  is  fully  as  inter- 
esting as  a  noveL" — Brooklyn  Standard-Union. 

"The  value  of  Mr.  Eggleston's  work  is  in  that  it  is  really  a  historj'  of 'life,'  not 
merely  a  record  of  events.  .  .  .  The  comprehensive  purpose  of  his  volume  has  been 
excellently  performed.     The  book  is  eminently  readable." — Philadelphia  Times. 


New  York  :  D.  APPLETON  &  CO.,  72  Fifth  Avenue. 


Tlie  United  Stales  of  Anicriea. 

A  Stiiiiy  i>/  the  Antirtittn  Cotnmomi'falth^  t/s 
Natural  Resources;^  Penplf,  Jtiiiuitrifs,  Matiu- 
Jacttircs,  Comnifrce,  and  its  ll'ork  in  Litera- 
ture, Science,  Education,  and  Self-G(n'ernnient. 

Edited   by   NATHANIEL  S.   SHALER,  S.  D., 


,V    IN     HAKVAHI.    INIVKR  .11  V. 


In  two  vulumcs,  royal  8vo.     With  Maps,  and  150  full-pajce 
Illustrations.     Cloth,  $10.00. 

1^  VF.RY  subject  in  this  r<)mprchpn''ivc  wfirk  '\^  timr-ly,  bccau-v  it  is  of  Im- 
-<  mediate  inieresl  to  every  American.  Sfx-cial  attention,  hf>w«-vcr,  may  be 
callefl  to  the  account  of  "American  Productive  lndiistr>'."  by  the  Hon.  Ed- 
ward Atkinson,  with  its  array  of  immensely  infonrinfr  diaj^mms  and  tables  ; 
and  also  to  "  Industry  and  Finance,  "a  succinct  and  lo(.;ical  prewntation  of 
the  subject  by  Professor  F.  W.  Taussig,  of  Harvard  University.  Ikjlh  these 
eiuinent  authorities  deal  with  questions  which  are  u|  permost  to-day. 


LIST  OF   CONTRIBUTORS. 


Hon.  WU.MAM  I..  WILSON,  Chairman  of  the  Ways  and  Means  Com- 
mittee, Fifty  third  Con^Tcss. 

Hon.  J.   R.   SOLEV,  formerly  Assistant  Secretary  of  the  Navy. 

EDWARD  ATKINSON,   LL.  D.,   Ph.  D. 

Col.  T.  A.  DODGE,  U.  S.  A. 

Col.  GEORGE    E.  WARING,  jR. 

J.   B.   Mc.MASTP'R,  Professor  of  History  in  the  University  of  Pennsylvania. 

CHARLES  DUDLEY  WARNER,  LL.  I). 

Major  J.  W.  POWELL,  Director  of  the  United  Suites  Geological  Survey 
and  the  Bureau  of  Ethnolof^. 

WILLIAM   T.   HARRIS,  LL.  D.,  U.  S.  Commissioner  of  Education. 

LYMAN    ABBOTT,   D.  D. 

H.  H.  BANCROFT,  author  of  "  Native  Races  of  the  Pacific  Coast." 

HARRY  PRATT  JUDSON,  Head  Dean  of  the  Colleges,  Univ.  of  Chicago. 

Judge  THOMAS  M.  COOLEY,  formerly  Chairman  of  the  IntersUte  Com- 
merce Commission. 

CHARLES    FRANCIS   ADAMS. 

D.  A.  SARGENT,  M.  D.,  Director  Hemenway  Gvmnasium,  Harvard  Univ. 

CHARLES  HORTON  COOLEY. 

A.  E.   KENNELLY,  Assistant  to  Thomas  A.  Edison. 

D.  C.  OILMAN,  LL.  D.,  President  of  Johns  Hopkins  University. 

H.  G.  PROUT,  Editor  of  the  Railroad  Gazette. 

F.  D.  MILLET,  formerly  \'ice-Pres.  of  the  National  .Academy  of  Design. 

F.  W.  TAUSSIG,  Professor  of  Political  Economy  in  Harvard  L'niversity. 

HENRY   VAN    BRUNT. 

H.   P.   FAIRFIELD. 

SAMUEL  W.  ABBOTT,  M.  D.,  Sec.  State  Board  of  Health,  Massachusetts. 

N.  S.  SHALER. 

Sold  only  by  subscription.     Prospectus,  giving  detailed  chapter  titles 
and  specimen  illustrations,  mailed  free  on  request. 

New  York  :    D.  APPLETON  &  CO..  72  Fifth  Avenue. 


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